High-quality education from a renowned college can lead students to find better career opportunities with high salary packages. However, the dream of higher education, especially. Educational loans are a common way for students and their families to manage these expenses. Many banks and NBFCs offer education loans at affordable interest rates and easy repayment periods. However, they have some specific terms and conditions regarding the loan amount, interest rates, loan tenure, repayment, etc. Remember, applying for an educational loan is not always easy. Many students and their parents make critical mistakes during the process, which can lead to delays, rejections, or unfavourable repayment terms. Here are some common mistakes to avoid when applying for a student loan in India.
Avoid Researching Multiple Options
One of the most common mistakes applicants make is not researching and comparing different loan providers. Different banks and non-banking financial companies (NBFCs) offer varied interest rates, repayment terms, processing fees, and moratorium periods. Comparing multiple lenders can help you find the best deal suited to your financial requirements.
Ignoring Eligibility Criteria
Every financial company has some specific eligibility criteria regarding age, university recognition, course type, and academic performance. Applying for a loan without ensuring you meet these requirements can result in loan rejection. It is essential to read the fine print and confirm that both the student and co-applicant meet all the necessary conditions.
Underestimating the Total Cost of Education
Applicants often request loans for tuition fees alone, forgetting other major expenses, such as living costs, travel, books, insurance, and examination fees. Underestimating the total cost can lead to financial stress later. Always calculate and include all expenses when applying for a loan, and ensure the amount borrowed is sufficient to cover the entire duration of your education.
Not being Aware of the Moratorium Period
A moratorium period is a time during which the borrower is exempt from making loan repayments, typically covering the study duration and an additional grace period following completion. Often, students misinterpret it and think that their loan for study abroad is interest-free during the moratorium period. Many loan providers charge simple or compound interest even during the moratorium. Make sure to clarify these terms with the lender.
Not Checking the Paperwork or Documentation
Incomplete or incorrect documentation is a major reason for loan processing delays or denials. Commonly required documents include admission letters, mark sheets, identity proof, address proof, income proof of the co-applicant, and cost of attendance from the institution. It is vital to double-check all paperwork before applying and keep copies handy.
Skipping Financial Planning
For student, attaining a study loan without making a repayment strategy could be a major issue that will affect their finance in the long run. It is vital to consider your future earning potential, job market trends in your selected career field, and currency exchange rates (if studying abroad). You can use an educational loan EMI calculator for better planning.
So, educational loans must be handled with careful planning and diligence. By avoiding these common mistakes, students and parents can navigate the loan process more smoothly.
