If you are not able to manage the finances of your child’s higher education, you might instantly think of applying for an education loan. An education or a study loan as it is usually referred to is offered by both private lending firms and banks. However, it is recommended that you should be aware of the EMI that you will be paying to repay the loan.
The loans taken for education allow you to start paying the EMIs after a certain grace period. This grace period is provided so that the parents do not have to bear the entire burden. However, you should start paying the EMIs right after securing the loan. By doing so, you will be able to avoid the higher interest that the lender charges for the moratorium period. If possible, you can opt for a shorter tenor to avoid the excess charges that could be applicable on loans of a longer tenor.
EMI or equated monthly installments can impact your financial freedom if you opt for an education loan at a higher interest rate. For giving you an idea of the EMI that you shall be paid, many lenders provide loan EMI calculators on their portals. In case you are applying for an education loan, you would be using an education loan calculator to predict the EMI amount in advance.
You just have to submit the values of the loan amount you are seeking, the tenor in which you plan to repay the loan, and the loan interest rate to the calculator. Upon submitting these values, the EMI calculator will predict the EMI value instantly. The benefits of using an EMI calculator are explained below:
Accessing net outflow
By using an EMI calculator, you can understand the total outflow, i.e. total amount you would be repaying to clear the education loan. This would help you to gauge whether it would be a smart decision to apply for that particular loan.
After knowing the EMI value, you will understand how much amount you will have to keep aside every month to pay the loan EMI regularly. You may prepare your budget accordingly or switch to another loan provider if the EMI does not suit your monthly expenditure or budget.
Tenor and amount
By using the education loan calculator, you can figure out the combination of loan amount and tenor that can suit your future loan repayment strategies.
While applying for an education loan for abroad studies, you must remember that unsecured loans might come at a higher interest rate. Therefore, it is better to obtain a secured loan against property.
A loan against property is a type of loan where you can utilize your property as collateral during the application process. Such loans are preferable when the loan amount is too high or when you do not meet the eligibility criteria to apply for an unsecured personal loan. The benefits of applying for a loan against property are stated below:
As you submit collateral while applying for a loan against property, the eligibility requirements are much more lenient. This ensures that the entire loan disbursal process is quick and hassle-free.
Flexible repayment options
A lender might allow you to choose a long repayment tenor when you apply for a secured loan. Though it would be convenient to repay the loan at a slow pace, it might also increase the outflow over the years. Therefore, it is recommended that you choose a financier who offers flexible repayment options.
Some financiers offer an online tool called eligibility calculator that provides you details such as the loan amount and tenor you are eligible for. It also gives an idea about the EMI and allows you to plan your repayment strategies.
Some NBFCs also offer pre-approved offers that include personal loans, home loans, education loan schemes, loan against property rate of interest SBI, etc. You may check whether one of these options helps you manage the educational expenses of your child.