look news india
In today’s times, education loan is a great way to get higher education, but hasty steps taken due to lack of information can cost you all your hard-earned money. Often students and their parents ignore the fine print of the loan agreement, which leads to a major financial crisis in the future. If you don’t proceed with proper planning and caution, this loan can swallow up your life savings. Let us know those 4 big mistakes which you should not make while taking a loan.
choosing the wrong scheme
The first big mistake is to choose a loan scheme without thorough research. Many times, students get deceived by the advice of the bank or the agent and choose that loan scheme in which the interest rates appear low, but the processing fees and other hidden charges are very high. Before taking a loan, always compare the interest rates of different banks, their loan repayment terms and the reputation of the bank online. Even a small difference can make you lose lakhs of rupees in the long run.
Ignoring co-laterals and insurance
The second mistake is not taking seriously the terms and conditions of insurance and collateral given along with the loan. Many times people take a loan but do not get the necessary insurance cover along with it, which can create problems for the family in times of crisis. Also, when pledging your property as co-lateral, ensure that you have a clear plan to redeem it. Hastily executed guarantees or property papers can lead to legal and mental stress later.
Not understanding the mathematics of moratorium period
The third and most fatal mistake is not understanding the Moratorium Period. Students think that they do not have to pay any money till the end of their studies, but during this period the compound interest keeps increasing rapidly. If you start repaying some part or interest of the loan during your studies, the debt burden reduces significantly. At the same time, those who completely ignore this period, a huge amount of interest accrues on them till they get the degree, which becomes impossible to repay.
Ignoring Repayment Plan
The fourth and last mistake is to choose the wrong tenure for loan repayment. Many people, in order to keep the EMI low, choose a long loan tenure of 15 to 20 years, the effect of which is that you pay more interest to the bank than the principal. Always decide the loan repayment tenure keeping in mind your future earnings and career prospects. The sooner you repay the loan, the more interest will be saved and you will be able to take a new flight in your career by becoming debt free.