Education Loan Repayment: Tips to Pay Student Loan Faster

You land a prestigious job after completing a degree abroad. The first paycheck arrives; with happiness, you tear it open, and then the other shoe drops. A chunk of it, not small but enormous, will go into education loan repayment. No one said paying off your education loan for abroad studies would be easy, but one thing we can say for sure is that erasing it sooner than planned is possible only by upgrading your repayment strategies. Understanding the importance of early loan repayment is crucial hence this comprehensive guide provides you with effective ways to repay your education loan early.

7 Tips to Pay Education Loan Faster

Clearing your education loan can seem like a daunting task. However, with the right strategy and a disciplined approach, it is entirely feasible to pay off your student debt ahead of schedule. Effective loan management not only alleviates financial stress but also paves the way for a more secure financial future. This involves understanding your loan terms, exploring repayment options, and possibly restructuring your debt. Below are some practical steps that can help you navigate the path to becoming debt-free more quickly and efficiently.

1. Begin Early

One of the primary considerations while looking at how to clear education loan is the repayment calculation. It means that the process of paying off an education loan faster commences even before you choose it. To that end, get comprehensive information on loan interest rates and any other charges. Next, use an effective EMI calculator to find the exact payment required to clear the debt entirely. Even small variations in interest rates can impact your repayment burden significantly.

2. Create Extra Income

Most students begin repayment after completing the moratorium period. However, it is wiser to start while pursuing a degree by getting a part-time job. Dedicate the earnings for education loan repayment. As a millennial, we all know how to leverage the internet to earn a few extra bucks. So turn into a social media influencer or a freelancer who peddles their talent online. If the traditional route is more to your bag, then apply to be a TA. Even a small gig will supplement your income and help reduce debt. 

3. Save More

Saving a monthly amount towards repayment of an education loan is good, even better is setting up a recurring savings fund. Each month deposit a fixed amount to it, and automate the process to make it consistent and more manageable. Use the corpus amassed to repay the education loan. 

Another strategy for saving more is to accumulate all cash windfalls.

4. Build a Budget: Track & Manage It

Getting an extra income might not be possible for all; in that case, try another way. Devise a shoestring monthly budget that severely trims your extravagance from the very first pay. Sustaining on a strict budget shouldn’t be difficult because you are already used to living hand to mouth as a student. Identify areas that can be categorized as unessential, then make the required cutbacks and sacrifices. Write everything down and keep track of it or find a reliable App that hacks down expenses, helps you live within your means, and saves more. You’ll be surprised at the amount of money you can spare in a month. Every penny saved should be advanced towards the loan. The great news is that living sparingly is temporary and only for the period when you want to repay the education loan faster.

5. Pay More

One of the easiest ways to be loan-free is to pay more than the minimum monthly amount. Anything extra you give the bank is deducted from the principal which means even a small quantity can go a long way because it reduces interest. If you have sufficient funds, then prepay the loan partly (or wholly).

6. Consider Re-Financing

Find out if a loan transfer is possible to a bank that has cheaper interest rates. Negotiate with your present bank for a lower interest rate. After you start working, the risk attached is reduced which means the lender may be ready to reward you with a better interest rate. Because refinancing takes know-how on bank rates, reading the fine print, and negotiation skills, it is better to let experts like GyanDhan help you out.

7. Do Not Take Extra Loan During Student Loan

It is wise not to take up loans besides your student loan, because this may be adding up to your further burden of unpaid dues. In case there are several loans at once, the monthly payments may increase, and its costs in interest can become problematic at times for the repayment deadlines; hence pay up your student loan first for financial stability without any unduly added stress.

Why Repay Your Education Loan Faster?

Repaying your education loan takes away a significant portion of your salary that can be utilized to reach other financial goals like saving for emergencies, etc. hindering you from taking risks with your career. Delays in repayments of education loans can add a serious burden on the borrower. 

Let us understand this with an example, for a study loan Mr. A took INR 40 Lakh education loan at a 10% interest rate, the interest amount you will have to pay is INR 17,21,793 and if an extra year is added, i.e. five years, the total interest you will be required to pay will be INR 19,91,667. You will be able to save around INR 2.7 Lakh by paying just 1 year early! Delay in making minimum payments, as defined in your loan contract, will lead to a lower credit score. 

Through the above example, it is clear how repaying your education loan even one year early can save a significant amount. Hence, borrowers must plan their education loans side by side and use effective budgeting strategies to stay updated with the repayment plans. The cost of studying abroad is substantial. While taking on a loan is a worthy investment in your future, it is not advisable to stretch the loan for a long duration.

This guide highlights how to clear education loan and the importance of paying off your education loan early, not just to alleviate financial stress, but to secure a healthier financial future. Choosing the right lender with the best terms is crucial, and GyanDhan’s expertise in comparing various lenders and their repayment plans ensures that borrowers can make informed decisions tailored to their specific needs. Therefore, to start your education loan journey today, check your loan eligibility now!

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