Things To Consider Before Taking an Education Loan
Education is a vital part of an every human’s life. Every human being has to achieve a basic education to progress in today’s world; the competition for gaining highest education has always been on the rise in the world. Every parent in today’s world wish to see their child educated with the best possible education available to them, but education now comes with a cost.
The cost of education has seen substantial increase in the recent years, if a middle-class parent dreams that his child would achieve the best and the highest education available around, the first thing that he has to think of is how is he going to finance the education that has a price that is so high and if the child wishes to study abroad the price is going to cost that parent a fortune.
Some people can afford but there are some people who can just dream of such things and even if they try to achieve their target they have to compromise a lot in their life. To make such dreams a reality banks provide education loans to the people who wish to achieve higher education but can’t afford it. But there are some points you have to consider while taking an education loan.
Expensive education loans: Education loans have become more expensive, the interest rate for education loans has been increased due to the huge loss incurred by the banks due to defaulters. The rate of interest has gone up from 9 to 11 percent annum to 12-14 percent per annum. While the personal loan interest rates in Chennai have gone up to 11-24 percent.This has caused the EMI to increase.
To add up more, the loans which have the amount of above INR 5 Lakhs the applicant will have to require a guarantor or collateral for security or in some cases both. While the finance for a personal loan in Chennai is maximum INR 10 Lakhs. In such a case the applicant can apply as co-applicant with his or her parents, but the parents of the applicant need to have a good credit score for that the applicant might need to check the credit score of the parents in advance so that the chances of getting the loan get reduced and the loan gets approved. If the applicant is employed and a working professional he can ask his company for a post-graduation sponsorship opportunity and if he qualifies the loan will be sanctioned for him.
An education loan can affect your Credit needs in the future:
The education loan in Chennai finances up to INR 20 Lakhs is enormous sum of money involved and the repayment of such a huge amount may take a long time but if during the payment of this loan the applicant defaults on the payments then his credit may be harmed and his credit score might decrease and this could create a problem for the applicant in the future if he tries to take another loan so due to the defaulted payment his loan may not get approved in the future.
In this situation, the applicant can apply for a credit card and use a credit card for the payment and keep a track of the credit card payments. The payment of credit card bills will help to increase the credit score and will maintain a balance if the applicant misses the loan payments.
These are the things that one needs to keep in mind while applying for education loans because these loans come with a huge rate of interest and defaulted payments can cause problems for the applicant so the applicant must inspect all the sides of the education loan and should be careful regarding the payments of the loan.