How to avoid an education loan when your child wants to be a doctor?
MBBS is considered one of the most expensive degrees in the world – it costs up to Rs. 1 Crore to study MBBS from a private university in India today.
In the 10 years, this cost will only increase further – thanks to the impact of inflation. If you are those lucky parents whose children have decided to become a doctor in the future, then here’s how you can start saving early to avoid any hassles.
How to avoid education loans?
More and more parents in India find it hard to manage the rising higher education cost. Even if they want to study abroad or choose any professional course, they find it challenging to meet the overall cost of their studies.
MBBS is the most expensive course and arranging funds to enroll the child in the best MBBS college in the country is a difficult task.
This growing cost of education has affected parents’ ability to meet the financial goals for their child’s education.
Taking up an education loan is the fastest way to let your child enroll in medical coaching and medical school. There is no doubt that you have to be financially strong for the child to let them become a doctor.
But, for low-middle-class and middle-class families, getting an education loan can be tough. They bring their own set of worries and tensions to the family as well.
Most education loans are non-collateral, which can cause high interest rates and fees. The average interest rate of 9.55% to 13.25% per annum can be hard to pay off after 5 years of medical schooling.
The interest rate can be cheaper if you take a collateral-secured loan. However it requires you to provide an asset, FD, or property to the bank as collateral. The collateral acts as protection in the event of repayment.
To avoid the pain of education loans, there are financial instruments that parents should consider if their child aims to become a doctor:
An underrated financial instrument, Mutual funds can be a great investment option if you have a time period of 10 to 15 years.
Families that invest in Mutual Funds can get good returns over the years. With a small monthly SIP of Rs. 1000 for your child today, you can reap the benefits in the future.
Public provident fund
It is an excellent solution where the banks give you a reasonable interest rate on the payment. It will ensure that you can save money on the superb return and keep your child’s future for the better.
There is no looking back if you save a child’s money through PPF. People find it the safest investment option, meaning you do not have to think much.
PPF generally has a lock-in period and allows you to save up to Rs. 1,50,000 yearly as deposits.
Another option that will give a good return in the future and ensure you get the benefits of the saving. It has good market value, and there is nothing to fear about digital gold.
You can save money from your income and invest in buying digital gold. Later if you want to sell the gold, you will get a reasonable market price as per the current gold value.
If you already have good income savings, you can put that bulk money in a fixed deposit for 20 years. It is a fixed source of income that will double up with the interest rate when it gets coverup after maturity.
FD is the oldest form of saving and can be a good investment if the base lumpsum amount is large enough to give a good return.
Know the future cost of education
Finally, the only way to save is to know how much you need to save in the future. A good financial plan requires a set of targets, which is why by using the College Cost Calculator, you can find out the future cost of studying medicine across the globe. Find out this future cost before you start planning your savings.
If your child aspires to become a doctor, then support their dreams mentally and financially. While there is no harm in taking an education loan, it is harmful to ignore the plethora of financial instruments that can easily help you build a good education corpus to help your child actualize their dream.
What will happen if I don’t pay an education loan?
If you don’t pay an education loan, it can have serious consequences. These may include accumulating interest and late fees, damaging your credit score, facing legal action or debt collection efforts, and potentially having your wages garnished or assets seized.
It’s crucial to communicate with the lender to explore repayment options and avoid default.
What happens if you don’t pay an education loan in India?
If you don’t pay an education loan in India, it will lead to serious consequences. The lender may initiate legal action, which can result in a damaged credit score, difficulty obtaining future loans, and potential asset seizure. It’s crucial to communicate with the lender and explore repayment options to avoid such situations.
Can I get 50 lakhs education loan without collateral?
Getting a 50 lakhs education loan without collateral may be challenging. Most banks and financial institutions require collateral or a co-signer for large loan amounts.
However, some lenders may offer unsecured loans for smaller amounts. It’s best to research and compare loan options from different institutions to find the most suitable one for your needs.