4 Mistakes to avoid while repaying your student loan.

With the rise in education fees, many students have started relying on study loans to help them pay for college tuition. Now, an education loan is often one of the first types of financing we apply for. Therefore, it is natural that we may have doubts when it comes to selecting the loan and repayment strategy.

It is very important to have a proper finance plan in place so that you do not fall behind on your EMIs when your student loan repayment begins. To help you out, we have listed some of the most common mistakes made by many during their student loan repayment process.

Read on and avoid these at all costs.

1) Not making payments during the moratorium period

Your lender may give you about 6 to 12 months of a grace period after the completion of your course. This is also known as moratorium. The moratorium is mainly for you to be able to find a job and become financially stable before you start making loan payments. However, it is considered good practice to begin making small payments towards your loan during the moratorium. This way you can pay back your loan quicker and more efficiently. Many students make the mistake of taking advantage of the moratorium to enjoy and spend their first couple of salaries, without thinking of the future. This can cost you later on in the form of heavy interest on your loan.

2) Choosing the Wrong Repayment Plan

Many students often choose the lowest instalment plan to repay their loans. But they fail to understand that with the lowest EMI comes the longest tenure, which increases the amount of interest you will have to pay overall. This is one of the biggest mistakes to avoid during student loan repayment.  It is advisable to choose the highest EMI that you can afford according to your financial capacity. By doing so, your loan will get cleared really quickly.

3) Overlooking refinancing

One of the best strategies to reduce your interest rate is education loan refinancing. Refinancing lets you enjoy multiple benefits such as lower EMIs, extended repayment tenures, and so much more. So, if you have a good credit score and income, you should definitely aim for a reduced interest rate by exploring the option of transferring your loan. Doing this could save you a significant amount on the sum you need to repay. However, to maximize your chances of refinancing your student loan, make sure to apply to multiple banks and financial institutions.

4) Missing payments

It is a big mistake to skip instalments during your student loan repayment. Doing so adversely affects your credit score even if you pay twice the EMI due the following month. Every missed or late payment stays on your credit history for years and influences your eligibility to take other loans. If you have trouble repaying your study loan for a specific month, talk to your loan provider and ask them for a solution instead of skipping out on your dues.

Make sure to plan your finances in advance before taking an education loan.

Hope this article helps you with your further decisions regarding your student loan.

All the best!