Pursuing higher education may be expensive, so education loans become the suitable solution for both students and parents. Tuition fees, accommodation, and all other academic expenses can add up quickly, so loans can be very essential in many cases. This means it’s not about affordability alone but ensuring you can easily repay with minimal strain on your finances. This makes it really important to know the key aspects of education loans that one should compare to make the appropriate choice for their academic needs. Here’s a detailed guide to help you navigate the process of obtaining a low-interest education loan.
Understand the Basics of Education Loans
Education loans are designed to help students cover the costs of their education, including tuition fees, accommodation, books, and other related expenses. They are offered by banks, financial institutions, and sometimes even government schemes. The interest rate, on the education loan, plays a crucial role in determining how much you’ll have to pay over time.
The type of education loan applied for also determines the eligibility for getting an education loan with a low interest rate. Education loans can be classified broadly as domestic education loans, international education loans, and loans for professional courses; government-operated schemes like subsidised loans are also available. Let’s now see how you can increase your chances of securing a low-interest education loan.
Maintain a Good Credit Score
A good credit score reflects your repayment ability and can lead to better interest rates. Students with limited credit history can leverage their co-applicant’s credit score. Timely debt repayments, low credit utilisation, and regular credit score checks are effective ways to maintain or improve creditworthiness.
Leverage Government Schemes and Subsidies
Government schemes assist specific groups with subsidised loans at lower interest rates or no interest during moratorium periods. For instance, the Central Sector Interest Subsidy Scheme (CSIS) provides full interest subsidies during the course and moratorium periods for eligible students. You should research region-specific options to benefit from such programs.
Choose a Shorter Repayment Tenure
A short tenure results in a relatively low interest rate for education loan and helps save money over the duration. However, the payment amounts will be lower when tenures are higher, with an increased overall cost in the long run. Use EMI calculators to find a suitable tenure, taking into account both affordability and cost-effectiveness.
Provide Collateral for Secured Loans
Secured loans are loans obtained by providing collateral such as property, fixed deposits, or other valuable assets. They usually have lower interest rates because the lender’s risk is usually reduced. Discuss this option with your lender if you have assets to pledge, but make sure you understand the risks associated with it, such as the potential loss of collateral in case of non-repayment. In addition, secured loans are often offered with flexible repayment terms and may have higher loan amounts. This makes them a suitable choice for financing higher education.
Apply with a Co-Applicant
A co-applicant, such as a parent or guardian, can significantly strengthen your loan application and improve your chances of securing favourable terms. Lenders assess the co-applicant’s credit score, income stability, and repayment capacity when evaluating the application. Selecting a financially sound and creditworthy co-applicant can not only help secure a lower interest rate but also enhance the overall loan approval chances.
Opt for Loans from Specialised Lenders
Specialised education loan providers such as non-banking financial companies (NBFCs) and fintech platforms may have competitive interest rates and personalised services. Research their options to find the best that would suit your needs, for example, faster processing and flexible repayment plans. The lenders usually cater to specific student requirements, so this is a good alternative to traditional banks. Carefully evaluate their terms and conditions to ensure they align with your financial goals.
Monitor Interest Rate Trends
Interest rates may be fixed or floating. Fixed interest generally tends to offer stability, whereas the floating rate is a fluctuating rate depending on conditions in the market. Look for such trends to select the right time and type of rate for a loan, balancing stability and cost advantage.
Conclusion
Getting a low-interest education loan requires proper planning, research, and action. It is possible to ease the burden of borrowing by maintaining a good credit score, comparing lenders, taking advantage of government schemes, and negotiating loan terms. Documentations, co-applicants, and collateral can also enhance the possibility of loan approval. Remember, education is a long-term investment, and securing the right loan is a crucial step toward making it a reality.
