Every year lakhs of students go out of the country to study abroad. Some go to America and take admission while others go to Britain to study. Studying abroad is also very expensive, as university fees run into lakhs of rupees. Apart from this, living expenses also run into lakhs of rupees. This is the reason why many people are not able to go abroad and study. People who have little money take education loan to meet the remaining expenses.
However, education loan has to be taken very thoughtfully, because many times people get trapped in the debt trap. Generally, while taking education loan, students assume that after completing their studies, they will get a job and then they will easily repay the loan. But on many occasions this is not possible, due to which students get trapped in the debt trap. In such a situation, let us know about those ways by which one cannot get trapped in debt by taking an education loan.
How does education loan work for students in India?
Education loan is given for higher education. The loan usually covers tuition fees, accommodation, books and related expenses. Applicants or their parents approach a bank or any financial institution for a loan, which gives them the money. But the money does not go directly into the account, but is given to the university in installments. After completion of the course, six or one year time is given, after which the student has to repay the loan amount.
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What mistakes do students make while taking loans?
Many times students taking education loans choose lower ranking universities to pay lower fees. Many times they go to study in such countries, where there are not many job options after studies. Due to not repaying the loan on time, the loan amount also increases. Instead of using personal savings to study, some people take loans. In many cases, students do not read the documents properly while taking the loan.
What is the biggest risk in taking an education loan?
While taking education loan for studying abroad, many times students take unsecured loan, in which the risk of default is high. Many times it also happens that students take loans to study in countries where studies are affected due to geopolitical turmoil or war. If this happens, the chances of getting a job also reduce and then it becomes difficult to repay the loan installment. For this reason, one should always study in such countries where there are abundant job opportunities after studies.
What is the harm caused by not repaying the loan on time?
It is very important to repay the loan on time, because if it is not done then it can spoil the credit score. If this happens then it will be difficult to take loan in future. Many times, students have to face legal action if they do not repay the loan on time, which increases the stress of the students. Besides, this also increases their expenses. In many cases, people have to lose their property due to non-payment of loan.
The solution to avoid getting trapped in debt?
Students taking education loan should make regular EMI payments. If they start working then they should repay the loan in higher amount. If a student has got a job after completing the course then he should use the income from it to repay the loan instead of investing in luxuries. The budget should be made thoughtfully. It is better to find a part-time job along with studies, so that you can also generate money to repay the loan.
If students are facing financial difficulties then they should contact the loan giving bank. One should know from them about the schemes which can help them. While taking loan, students should keep in mind that they take only as much money as they need. You should look for a cheap flat while studying abroad. Minimum expenditure should be made on eating out.
