Student loans allow many to fulfil their dreams even when they do not have the necessary resources to fund them. These loans can be collateral-based or collateral-free. Whichever type of student loan you apply for, you need to have a solid plan to repay it and utilise every option to improve your repayment. The timely payment of your EMIs will ensure that you do not accumulate a lot of debt. Here are some tips to manage your student loan and ensure its timely repayment.
Choose a Shorter Duration Loan
The best way to manage your debt is to opt for a short-tenure student loan while applying. Shorter-duration loans come with higher EMIs but you save a lot in terms of interest. Take stock of your finances and your ability to earn in the future and then plan your student loan term accordingly. Choose an easily manageable term without putting too much interest burden on you.
Choose Your Repayment Plan Carefully
Student loan providers realize that a student is not in a position to start repaying the borrowed amount immediately. For this reason, they grant a moratorium before the repayment starts. Apply for a loan that provides you with a reasonable moratorium period so that you can find a job and start repaying. Plan your loan tenure and repayment details after considering the amount that you expect to earn after finishing your studies. Choosing an EMI amount that is more than what you can afford can lead to the accumulation of student loan debt and affect your credit worthiness.
Make Interest Payments During Moratorium
Student loan EMI generally start after a gap period (when you are studying) but the interest on the loan starts accumulating from day one itself. This means that you get ample time to plan for your EMI payments. To avoid the accumulation of interest and piling up of debt, it is best to pay the interest on your loan from the beginning itself. You can do this by taking a part-time job while studying or seeking your parent’s help. When you pay off the interest on your student loan from the beginning itself, it does not get compounded to enhance the overall repayable amount.
Use Opportunities While Studying
Even when you are studying you can explore various options to earn stipends and extra income. Short-term internships or part-time teaching jobs can help you earn some money that can be used to repay the student debt.
Start Saving Early
A good way to ensure that your repayment is done on time and you do not accumulate debt is to start saving early. Whatever amount you are earning or even getting during your study period, save a portion of it to create a corpus that can be used for loan repayment. By prioritising your debt repayments over all other financial obligations, you save yourself from debt accumulation.
Set Up Automatic Payments
Missing out even on a single EMI payment can hurt your creditworthiness besides invoking a penalty or additional interest charges. To avoid accumulation of debt, you need to be diligent in paying the EMIs. You can avoid delays or misses by setting up automatic debits from your bank accounts. This means that the EMI payment is automatically transferred from your bank account into the lender bank’s account.
When you submit your student loan application, do check the associated terms and conditions so that you can plan your repayment schedule and take steps to adhere to it.