Graduation party mein Rahul aur Rohit life plans discuss kar rahe the. Both of them want to go abroad for further study. It is no problem for Rohit because his parents have the financial resources, or are “baller” as Rohit likes to call them. For Rahul, things might not be quite as easy. Although his family is more than comfortable, they do not have sufficient savings or earnings to afford an overseas education for Rahul or any of his siblings.
Rahul ke paas ek hi option hai - apply for an educational loan. He is worried about whether he will obtain a loan in the first place or not. Aur agar loan mil bhi gaya he is worried about whether he will be able to pay it back. Sounds familiar? Dost MBA ya MBBS ya koi bhi foreign education paane ke liye, many youngsters have to often take a loan. Bahut logon ke liye yeh bahut gehri stress ki baat hai lekin fikar mat karo because we have a step-by-step guide to help you along your journey.
Hum aapko kai techniques and tricks suggest karenge - jisse use kar ke aap kabhi bhi apna EMI payment nahi miss karoge. Uske baad, selection ke liye bhi kai suggestions hai. Toh stay tuned.
Part 1 - Paying off your loan (for those who have already selected/ taken their loan)
Suggestion # 1 Pay off bits when you can
If you recall, Rahul was not only wondering about whether he would get a loan, but also whether he would be able to pay the loan off in the end. Rahul could lessen the burden of his loan by paying off the interest accrued during the moratorium period. Moratorium shabd suna hi hoga kyunki akbaar mein loan moratorium kar ke bahut saare headlines the jab coronavirus starting phase mein tha. Moratorium is the period during which no EMI has to be paid. Yeh moratorium zyaada tap course duration ke length ka hi hoga. However interest accumulates during the moratorium period aur aap ye interest ko pay off kar sakte ho.
Take up a part time job alongside your studies. Experience mila ya na mila kam se kam loan amount end me kam rahega. Thoda bahut savings karne ka bhi aadat dal do.
Suggestion # 2 Mentally prepare for being conservative in your first year of employment
Jab job mil jate ho sab ko treat dena hota hai, you want to celebrate and spoil yourself, buy a new phone… hai nah? True, lekin be prepared to control and limit your spending taaki monthly EMI pay karne mein koi problem nah rahe. Mai pehle se hi bata raha hu - people will make fun of you. Lekin keep your eye on the prize. You need to pay your monthly EMI come what may kyunki failure to pay will affect your credit score and future credit worthiness.
Make a seperate account and start accumulating any extra savings there to tide you over in high expenditure months. In fact, that brings us to our next point.
Suggestion # 3 Have your money pay your EMIs - invest!
Think about making small investments. Mutual funds allow for you to invest small amounts monthly (even as low as Rs 1000) under what is called a Systematic Investment Plan, or SIP as well as add to the investment by way of a lump sum (as and when capital is available). EMI ka habit bana hi rahe ho; saath mein why not add a small SIP amount to the capital that you are putting aside monthly? Additionally, as and when you have accumulated money in your savings account too, can add it to your investment as a lump sum. After all EveryoneCanInvest.
Dost loan EMI ko apne salary se pay math karo. Have your savings pay your EMI instead. For example, course duration ke hisaab se you can take an one year to three year mutual fund on SIP investment mode and opt for systematic withdrawal plan - Isse, as soon as you graduate, monthly payout se aap apna EMI pay kar sakte ho. Jab aapke savings account (as recommended in suggestion 2) mein paise accumulate ho jata hai, usse aapka capital amount bad jayega and corresponding aapka payout bhi bad jayega.
Yeh suggestion lene ka ek aur fayda hai: just in case koi unforeseen economic problem ke vajah se naukri ya salary mein koi problem raha. You can bank on your savings to help pay your EMI.
Mutual fund investments se aap kam risk aur kam monthly investment mein apna capital jaldhi bada paoge. Yeh starting salary earners ke liye ideal ho sakta hain.
Of course, research and learning karna bilkul zaroori hai before investing. Get your basics right and upgrade your knowledge about investing - humare blogs zaroor check out karna aur haan yeh podcast ke jaise aur bhi podcasts hai. If you haven’t got much time on hand, fikar mat karo, we have a library of educational videos that can also help you wrap your head around key investment terms and topics.
Suggestion # 4 Don't forget to claim your tax benefit
As discussed earlier you can claim an income tax benefit when repaying your educational loan. Yaad rakhna ki the deduction is only applicable on the interest amount not the principal amount repayment. There is no upper limit on the amount of deduction that can be claimed.
Since there is no upper limit, agar aap apna kisi mutual fund ko redeem kar rahe ho, you can pay off a large chunk of your loan when the mutual fund redemption happens. Ji haan invest karne se, there are many new loan sorting options available to you.
Suggestion # 5 - Avoid unnecessary stalling
When it comes to repayment of your loan in situations such as the ongoing pandemic, banks offer moratoriums to loan customers. Lekin, jitna ho sake, EMI regularly pay karna jab tak aapko koi salary hit ya job loss nahi hota. Moratorium ke samey interest accumulate kiya jata hai.
Yeh mutual funds aur stocks mein invest karne ka ek bada fayda hai. Agar aapke pass mutual fund investments hai, ya stocks, yeh bahut liquid investments hote hai. In case you are facing any financial distress, yeh bechne aur liquidate karne ke liye asaan hai. Aap inhe encash kabhi bhi kar sakte ho - there is no lock-in period (except for tax saving ELSS mutual funds)
Part 2 - Choosing right (for those who are yet to take their loan)
Suggestion #1 Choose your partner and product carefully
You need to choose your bank and your loan very carefully and you must make a few comparisons, taki aap apne liye best deal chun paye. Bank pe dyaan dena. Chote banks unsecured loan dene ke liye taiyaar reh sakte hai. Student loans are typically unsecured loans, that is they are granted to people based on their credit-worthiness. The loan applicant does not need to sign anything as collateral against the loan. Yaad rakiye ki you are looking for the best deal on your loan, rather than the best service or the best bank in any other way. Look for A bank that will offer you an unsecured loan.
Preferably a gazetted financial institution or Indian scheduled bank because only when you opt for one of these, can you benefit from tax exemption. Ji haan tax exemption. Is ke baare mein aur jankari step 2 mein janenge. A tenure and moratorium period that suits your course duration and life plans and also the economic outlook as far as it can be guesstimated.
Suggestion # 2 - Opt for higher EMI and shorter tenure
Bahut log chote EMI pe dhyan de ke bigger picture bhool jate hai. Of course, it is a much less alarming proposition when you opt to pay back the loan over a longer period, taki aapke monthly EMI payments zyaada heavy na rahe. Lekin by doing this, you are increasing the total cost of your loan. In other words, what you end up paying in total, will be a higher amount. Example dvaara samjha deta hu:
Soch lo ki Sita aur Gita dono 10 lakh rupees ka loan 9% per annum interest pe le rahe hai. Sita chooses to pay her loan back in 5 years, while Gita chooses to pay her loan in 10 years so that her EMI will be lower. Sita’s monthly EMI is Rs 20,758 while Gita’s is Rs 12,668. Sounds good to be Gita so far right? However, in the long run, Sita will end up paying a total of Rs 12,45,501 , while Gita will pay a total of Rs 15,20,109 , or almost Rs 275,000 extra! Ouch! Wouldn’t want to be Gita now, would you? Moral of the story - bear the burden of a shorter EMI to pay less in the long run. Loan se jaldi chutkara bhi pa sakte ho.
Tax benefit bhi max to max 8 years ke liye applicable hai. Income tax act ke section 80E ke hisaab se you can get an income tax deduction on the repayment of your educational loan lekin yeh tax benefit sirf initial assessment year plus 7 years tak diya jata hai … nahi toh until interest is paid off. Whichever is earlier. One more good reason to opt for a shorter tenure.
Agar aap apne mutual fund investments ke systematic withdrawal plan ke paise bhi use kar ke EMI pay kar rahe ho toh, it becomes much easier to pay a higher EMI.
Step 3 - Take the loan amounts in phases
Course ke liye aapko semester ke hisaab se fees bharna hota hai. Saath saath interest loan amount taken pe calculate kiya jata hai. To have a lower amount of interest payable loan amount low rakhna by taking the loan amount in phases.
Take only the bare minimum amount required. Sort out any expenses that might suddenly arise by investing in liquid investments such as mutual funds and stocks that can be redeemed or sold. Alternatively, after a short withdrawal period, you can have your capital be returned to you somewhat like a monthly salary by a systematic withdrawal plan.
Worrying will not help pay off your student loan, dost. Instead, careful selection aur thoda bahut self control aur smart investment se aap apne student loan asaani se pay off kar paoge. Get more loan related strategies and guidance, and investment learnings at www.angelone.in