How To Reduce The Burden Of An Education Loan

By BankBazaar | July 1, 2016

Is it wise to buy a house or should you continue living on rent? When does one or the other make sense? We’ll lay out all the important factors to be considered to help you make this decision.

Good quality education doesn’t come cheap. When you start planning your higher studies, the first thing that probably comes to your mind is ways to manage your expenses to reduce the burden of your Education Loan or that of your child. Most prestigious colleges are quite expensive and if you don’t plan your finances well, it could affect your future as well as that of your child.

To avoid spending a good chunk of your salary on education, simply because of a lack of planning, you should get a few things outlined well ahead of time. From carefully choosing the right loan to taking adequate measures to manage your finances well, it’s all about getting the minute details right.

Here are a few ways to reduce the burden of your Education Loan:

  • Look for possible scholarships

Before you start the hunt for a suitable Education Loan, explore all the possible scholarship options. It’s always better to look for opportunities that can help you save a lot of hard-earned money in the future and also all the effort that you otherwise need to put into finding the right Education Loan.

  • Choose the right Education Loan

Since you’ll be surrounded by a lot of options, choosing the right Education Loan will most likely be one of your biggest challenges. Before taking the final call, you need to analyse your needs well and choose an option accordingly. For instance, if you’re planning to study abroad, you’re likely to need more money compared to taking up a course in India. Getting a loan that has better repayment flexibility would make more sense for you, wouldn’t it? Generally, the main factors that you need to consider before making the final choice are interest rates and flexibility in payment options. Making a smart choice in the beginning can significantly help you out later.

  • Make a realistic repayment strategy

Before chalking out a plan to repay the money, take all your other expenses into account. Instead of making unrealistic plans to repay the loan by ignoring your basic expenses, it’s better to prioritise your finances. An Education Loan is not all you need to worry about; there’s other important stuff like your basic lifestyle expenses that need to be planned well too.

  • Explore all aspects of your loan

Before deciding which loan to choose, you must know every minute detail about it. This includes everything, right from the formalities and documents required, to the repayment options and fluctuations in interest rates. You need to know all these details like the back of your hand to avoid any prolonged financial burdens.

  • Don’t keep chasing ‘the perfect job’

The idea of perfect significantly varies from person to person. So, instead of running after your dream job at the risk of defaulting on your loan repayments, take up the one that’s readily available. It doesn’t mean that you need to compromise on your dreams; it just means that you need to plan your dreams better. Always remember that it’s better to have a steady source of income to repay your loans instead of letting them pile up endlessly until you get the perfect job. 

  • Be open to making a few sacrifices

To repay your loans faster, you must bring some effective changes to your lifestyle. These might include things like chalking out a budget at the start of every month and strictly adhering to it till the end of the month and controlling any unwanted expenses. Make a priority list of things that need to be bought and stick to it. You need to leave some room for emergency or ad-hoc expenses. Plan better so that you don’t feel the pinch as the end of the month approaches.

  • Look for ways to earn more

Always keep looking for ways to earn more or ask your kids to look out for opportunities if you took the Education Loan for them. Take up freelancing opportunities if need be. Even if this means stepping out of your comfort zone, do it. Once you or your kid starts earning more, not only will it help you with the repayment of the existing loan but will also improve your lifestyle. As a bonus, you or your child will also get to acquire new skills and talents.

Additional Reading: The Nitty-Gritty Of Education Loans

Here’s a tip: You can claim a tax deduction on the repayment of your Education Loan.

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