10 Mistakes To Avoid While Taking An Education Loan

It is every parent’s dream to see their child pursue the right education and achieve their potential. Hardworking, talented students hope to build a successful life through their dream education.

As simple as it may sound, the journey to top quality education is challenging and needs navigating through right information and planning. The rapidly rising costs of education makes it imperative to plan finances in advance. You need to find the right balance of funding your education through your parents' savings, student education loans and scholarships or grants. Choosing the right student education loan is a crucial decision. How to take an education loan? How do education loans work? What are the rules or guidelines for an education loan? There could be numerous questions you will have. To help you start, here are some pertinent mistakes to avoid, while availing a student education.

Not taking the loan at all

Is it good to take an education loan for your child? A lot of students and their parents think that taking a student education loan is bad and it should be avoided at all costs. However, there are three distinct benefits of taking student loans, even if your parents/family can afford the costs of education.

● Taking your own responsibility.

● Saving your parents’ retirement money.

● Building positive credit history and score while studying.

Starting the loan process late

Most Indian parents and students believe that student education loans are easily available, and they will be able to quickly take one when their admission process is complete. This is a wrong perception. Please remember, when the fee dates come closer, students with no back-up undergo a lot of stress. That is why it is advisable to start the process of financial planning and research on how to take a student education loan during the college application stage.

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Giving incomplete or incorrect information on the application

Students and parents should NOT take the necessary documentation fulfilment for granted. It not only delays the entire process but also runs the risks of rejection due to incorrect or incomplete information for lenders

Only applying to banks and not to student loan NBFCs/Fintechs

It is also important to apply to specialised players operating in the education financing space and banks. This not only saves time but also lowers the risk of the possibilities of rejection from banks or delays on their part in processing loan applications. Students are running against tight timelines and delays in loans can put them in a challenging situation

Underestimating the efforts of visiting bank branches

Indian banks will require the students and parents to visit branches for application, documentation and checking the application status multiple times during the process. This means the students and parents will have to plan leaves from their studies and work respectively. Do not avoid or underestimate the importance of doing this due diligence.

Only considering the rate of interest as decision criteria

Many parents and students think a low-interest rate of a student education loan is the best deal. However, that’s far from the truth. There are a lot of important factors like time taken, hidden charges, and the disbursement process etc that must be taken into consideration before deciding on the lender.

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Not assessing the post-disbursement service requests

Even subsequent semester fees, disbursement and other service requests such as interest certificate for claiming income tax benefits, EMI changes, pre-payment of loan etc. are vital services that must be weighed while taking loan.

Not going through the fine print of the application and loan agreement

One must not blindly sign the application and loan agreement as they may have clauses and hidden charges that will become issues after availing loan.

Not doing a reference check with others who have taken a loan

One must talk to the students and parents who may have taken student education loans from that bank or NBFC/ fintech. That will give one the opportunity to check whether the product, service standards, and overall costs match the claims of the lender

Not taking insurance

Taking the right insurance products along with your student education loan can ensure peace of mind and safeguard against any unexpected mishaps during the course of study and repayment of the loan.

Going after your dreams, shouldering the responsibility for the same can be intimidating and rewarding at the same time. It makes you a risk taker in the early years of your life and also prepares you well to explore the opportunities, and face challenges.

Prashant Bhonsle is founder and CEO, Kuhoo Edufintech, that works to bridge the gap arising between student aspirations and reality due to financial hindrances.