How to repay education loans?
When it’s time to start repaying their student loans, borrowers have a number of alternatives. Federal student loans provide the greatest options, but private student loans have fewer options.
The optimal method of repayment for you will depend on the type of loans you have, the amount you owe, and your financial situation after graduation.
In this blog, we will discuss different repayment options available for abroad education loans and how to choose the one that’s right for you.
Different repayment options Available for Abroad Education Loans
Following are the different repayment options available for abroad education loans:
Education Loan EMIs
EMI (easy-monthly-installment) is the most popular way to keep your student loan repayment plan organized and self-driven.
Students can return their study loans in installments by making monthly payments known as EMIs, which are predetermined amounts of money set at the time the loan was approved.
EMI is a total that includes the interest on student loans that must be paid as well as a percentage of the loan’s principal.
Education Loan Part-Payment
Students also have the option of making a lump sum payment at regular intervals to pay off their study loan in addition to the EMIs.
In this way, applicants can repay their student loans a little bit earlier and pay up a smaller amount of interest overall. Only partial payments up to a certain amount and subject to a processing charge are permitted by some banks.
They also charge a processing fee in some circumstances, but not all banks do this. Based on patterns rather than statistical confirmation, one should only partially pay off their education debt if they have a consolidated sum that is at least four times their monthly EMI.
Education Loan Pre-Payment or Foreclosure
Prepayment of student loans or foreclosure are options available to students who have the opportunity to pay back their whole loan balance all at once.
After the most recent modifications to banking standards, almost all banks are required to offer this service, however, some banks still charge a processing fee for it. Still, paying off a student debt in full is preferable to doing it gradually.
Education Loan Repayment Modes
Each bank accepts several payment methods, and applicants can choose how they want to pay back their study loans. Some loans, such as school loans for study abroad, have strict payment requirements.
A better understanding of student loan repayment options makes it easier for applicants. The full breakdown of repayment options for student loans may be seen here:
Why do you need an advisor to apply for education loans?
Repay Education Loan by Cheque
Most banks accept cheques as payment for student loans. Many organizations also provide the choice of assigning PDCs (post-dated cheques).
These pre-signed post-dated cheques are only used when the EMI is due and are delivered to the bank with a specified EMI amount.
For a little additional fee, several banks now provide cheque collecting services, which aid with student loan doorstep servicing. Demand Draft, however, is another matter.
Demand drafts are rather risky. Hence not all banks accept them as loan repayment. However, students should unquestionably request the option of paying back student loans via demand draft.
How to choose the best education loan?
Education Loan repayment by cash
All banks allow cash payments for student loan EMIs. Student loan applicants and co-applicants have two options for making cash EMI repayments: visiting the branch or using a home collection service.
At the branch, there are “no additional fees” for cash payback. Cash collection, however, entails a regular service charge.
Automated EMI Payments of Student Loans
ECS (Electronic Clearance Services) and NACH (National Automated Clearing House) are two automated loan EMI repayment options.
Those who want to pay back their student loans with savings accounts at the same bank or another bank can use this option. They would have to verify and sign a NACH mandate authorizing the loan provider (bank) to request and receive automated payments from the savings account on each month’s due date.
The service can be terminated at any moment, and customers can postpone any EMI payments if their balance is inadequate. Penalty fees are applied when automatic EMI payments are late.
Students who don’t complete their ECS/NACH payback cycle must go to the bank to reactivate their account and pay any missing EMIs. Even so, it’s more practical than alternative payment methods that call for manual interaction.
Spend some time learning about your repayment alternatives if you have student loan debt. This should ideally be done prior to graduation so that you can decide which repayment plan to begin with.
If you select an income-driven plan, review your finances annually to see whether a different repayment option would be preferable for reducing interest costs.