Education Loan Repayment: A Complete Guide for Indian Students

An education loan is highly important for students who want to study abroad. Similarly, knowing the education loan repayment procedure is crucial if you are an Indian student living abroad. So, here is a complete guide that will help you to learn how to repay your education loan without any hindrance. Go through it to find out how you can repay your loan on time and without any hindrances.

Why is it essential to repay a student loan?

An education or student loan repayment is important as it helps maintain a good CIBIL / Credit score. Moreover, it helps you to avoid additional penalties, and fulfill your financial responsibility, increasing trust with your lenders. 

Therefore, it would be helpful if you would need to apply for any future loan. If you manage your loan repayment well, you will uphold your sense of commitment and contribute to your stable financial future.

How to Repay an Education Loan?

“Can I start repaying my loan during the moratorium period?” “Will paying simple interest be better than paying partial interest?” “How can I calculate my loan structure?” 

Such questions might often linger in your mind!

You can repay your loans in various ways. All you have to do is understand the education loan repayment schedule and set your plan according to it. Come find out how you can repay your loan in various ways. Furthermore, find out what is the best way of doing it is, and which process would be the best for you. 

Smart Use of Calculators for Student Loan Repayment

You can use online tools such as a loan calculator during your loan education repayment period to help you plan more effectively. The loan calculator can estimate your monthly installments based on interest rates and tenure, helping you to budget better. Furthermore, they will also help you choose a suitable payment strategy.

Managing Student Loans During the Moratorium Phase

Repayment is not mandatory during the moratorium period of an education loan. However, you can pay your interest during this time to reduce your loan burden later. Prepare your phase financially, understand better your obligations, and start to make regular repayments after your moratorium period ends. 

Repaying Student Loans Amid Financial Emergencies

An unexpected event can delay your repayment plans. So, if you are facing any kind of emergency, look into the deferment options to modify the schedule. You can also take a look at the education loan repayment rules in India to know more about this. You can also have a word with your vendor, and they can help you out in this matter. 

Paying Simple Interest While Studying

Paying simple interest while studying will help you minimize the overall interest accrued. Therefore, once you start repaying your loan, the total amount is lower, and the overall transition phase is also smoother. If you are confused about the transition from the moratorium period to the repayment phase, ask your vendor, and they will explain when to repay your education loan.

Partial Interest Payment While in School

You can also choose to pay partial simple interest during your moratorium period, which means paying a portion of your interest while studying. This strategy will ease your future burden of student loan repayment principal rate. For more information on this mode of payment, you can connect with your vendor and they will help you out. 

Understanding EMIs in Loan Repayment

EMIs or Equated Monthly Instalments are the fixed payments that you would need to make after your moratorium period ends. This mode of payment will align with your employer student loan benefits, if they are applicable where you would work. Knowing your EMI structure will be the key to planning finances and ensuring timely loan closure. You can use a loan calculator to learn and plan more about your EMI structure. 

Popular Education Loan Repayment Modes

Now that you know about your education loan repayment ways, find out about the modes through which you can make these payments. 

Here are some of the most popular payment modes for your education loan; check them out!

• National Automated Clearing House (NACH): It is an NPCI centralized payment system. It offers seamless payments through automated recurring payments of your EMIs, ensuring timely transactions between you and your bank.
• Electronic Clearance Service (ECS): It is an RBI-regulated payment system, and it enables automatic transfer of your EMIs. This type of payment ensures that your payment is hassle-free and directly for your bank account.
• Cheques: Cheques are the most traditional method of loan repayment. If you want to repay your loans through cheques, while living abroad, you can ask your co-borrower, and they can do it for you. If you are following this type of repayment model, you can opt for pre-dated or post-dated cheques, according to your convenience. 

FAQs

• What is the rule of education loan repayment?

As per the education loan repayment policy in India, repayment normally starts after a moratorium term. This is the duration of the course plus 6 to 12 months (referred to as the grace period). Borrowers are supposed to begin repayment of the loan after that period via EMIs. Interest might accumulate during the moratorium, depending on the type of loan. The repayment term might go up to 15 years, depending on the amount of the loan.

• How to repay a student loan?

If you want to repay your student loan, begin by going through your loan agreement and noting when the repayment tenure begins. Post that you can opt for an appropriate repayment schedule, like EMIs, and pay interest throughout your study if feasible. Utilize calculators such as EMI calculators for planning, and enable auto-debit via NACH or ECS to prevent default payments. Keep in contact with your lender for restructuring or deferment schemes if necessary.

• How are the repayments done on education loans?

You can repay your loans through the following modes of payment. Check out:

• National Automated Clearing House (NACH): NPCI authorized an automated payment system for seamless transaction of EMI.
• Electronic Clearance Service (ECS): It is an RBI authorized payment system, through which you can make auto-payments of your EMIs.
• Cheques: The traditional method of repaying your EMIs can be done through pre-dated or post-dated cheques. 

• What is the maximum repayment period of an education loan?

The maximum repayment period of your education loan is up to 15 years after your moratorium period. The moratorium period usually extends up to 12 to 16 months post your graduation. These extended periods reduce your EMI burden, making it easier for you to repay the loans without feeling its burden. 

• How can I calculate how much I have to repay for my education loan?

You can calculate your education loan repayment structure through a loan calculator. For this, you can visit your vendor’s website and calculate from there. Each vendor has a personalized EMI calculator that their consumers can use. 

Parting Thoughts 

So now you know the education loan repayment procedure thoroughly. Utilize this guide and start planning your repayment procedure from now and never experience a burn in your pocket in the long run.