There is no doubt that good education is your ticket to better career prospects. It helps provide a launch pad or a mid-career step-up. But, it comes at a price that is only going up with time. And, for most people, an education loan is a must to meet the cost of education.
What most people don't realise, is that an education loan is also the first big financial decision we make - and one that stays with us for almost 5-6 years into our working lives.
We came up with a list of things that would help you make a better decision.
#1. Is your education course the right choice?
Your priorities have to be in order before you choose a course, especially one that requires you to take a loan. Ask yourself some questions before making the decision, such as: is this the best course offered in the respective stream?
Considering your CGPA and other competitive exam scores, is this the ideal option for you, personally?
Additionally, you must speak to the alumni of the course and get their views on the faculty, facilities, research opportunities provided by the university.
You must also try to gauge what type of employment opportunities did they receive after this qualification.
#2. Job opportunities
Think about the job opportunities available to you after this course, because let’s face it, usually an education is meant for a better salary package, than what you can command at present.
You must know what is the minimum salary you are likely to get after getting the degree, as this will be an indicator of whether you can pay the monthly installments of your loan or not.
If not, you must have a backup plan or parents who are willing to take care of the loan repayment at least in the initial years of your career.
#3. Rate of interest & repayment period
Once you are sure about a course and about taking an education loan, you should evaluate all loan options available to you. Compare the rate of interest provided by different banks as well as the time of repayment allowed.
A loan of Rs. 4 Lakhs or less comes with an interest of 10%-15% payable within 3 years; whereas, a higher amount is usually given at lower interest rates, but a longer repayment period of 5-7 years.
A shorter duration may feel like a hole in your pocket, but it prevents you from paying a large sum of interest over a longer period of time.
Banks typically ask for a guarantor in case of a default on the loan amount. For students, this person is usually their parents or a guardian.
#4. Do you have an existing loan?
In case you or your family have already taken other loans, you must consult them before burdening them with more debt.
If the existing amount of loan is small, then you have no reason to worry. If it is a large sum, then please avoid another big loan simultaneously, as the family income and savings can take a major hit in this period.
This is all the more reason for you to ensure that you have good job opportunities after graduating so that you are able to repay the education loan, even without any help from family.
Start your credit journey right, repay the education loan well in time and enjoy the merits of high credibility for future loans.