Sometimes a student or a parent may believe that they know everything about a loan repayment process. But, in many cases you may be misinformed about certain myths that are prevalent in the industry.
We at Creditap list down seven myths for you so that you may focus on the reality of what repaying an education loan means.
Myth 1: Loan taken is also a source of income
When you take an education loan, what you need to understand is that it is an investment that will help you to become secure in the future after an education. The loan will provide you with an academic degree that will kickstart a paying career.
Use the money wisely, don’t spend it on social entertainment. So, a loan is not your source of income for living expenses.
As a student, you must repay it after you get a job. Being prudent right from the day you get the loan gives you the financial acumen to prepare for its repayment.
Therefore until you repay the loan do not treat money as a source of income and over leverage yourself or burden yourself with loans.
Myth 2: Refinancing the loan is a bad idea
Well, you must refinance a loan. It is indeed a good idea.
If you are stuck to a loan product whose tenure is long and interest rates are high then you have to refinance the product.
What is expected from a good loan policy?
You expect lower interest rates and a longer repayment period. This could be achieved by refinancing the student loan. Go for refinancing if you find better rates.
Refinancing the loan makes the repayment easier. It reduces tenure and lessens the interest burden.
Myth 3: Repayment plans based on income is bad for credit
Of course not. Remember that your parents co-signed your loan application and they have good credit. So, repayment plans based on income prove to be good for credit.
These income-based methods of repayment help a lot in lowering the monthly installments of repayment for a student. These plans provide the borrowers with a chance to manage the repayment expenses in a better way. The monthly repayment would be reduced, but the interest rate would remain intact as per the plan that you considered. In short you also have to thank your parents for cosigning on your behalf although you will begin to repay the loan as soon as you find your job.
Myth 4: A loan is a loan, I don’t have to do any research on it
You will have to do more research when you take a loan.
It is always best to stay well informed otherwise you will be paying a lot more money in interest.
Do conduct a little survey and compare all the loan plans before deciding which one suits you best.
It is best to check the list of NBFC companies to get more information about the loans and their rates, the terms and conditions of repayment.
Myth 5. Lower grades mean that you don’t get a loan
If this was the case then there would be no meaning to lending as an industry. Imagine some of the greatest minds did not score good grades. But they always had finance backing them.
So, having lower grades does not mean that the loan will not be approved. What is needed for the loan is that there must be a guarantor along with a genuine and confirmed admission at an institute of your choice.
Myth 6: Selection in at top Institute will get you a discount on the loan
The job of a financier is to get you the best rate on a loan. It’s not their job to decide that there will be a discount while repaying the loan product.
Getting admission to a good college does not mean that the loan products will be available at a discount.
When you borrow, you repay that’s the language of a bank or any financial institution.
Myth 7: Education loans are moratorium based and I can pay when I can.
Education loans are not moratorium based. What is a moratorium? It is a period where the borrower is exempted from paying the education loan. The payment of interest can be deferred, depending on the financial partner, but you have to start paying the loan and interest from one year after completing your education program and this rule is specified by the Reserve Bank of India.
These are some of the myths that are doing the rounds today. Hope we have it busted. Download Creditap for your student fee and study abroad loan.