A student loan is a prudent choice to finance your education independently without depending on your parents. Therefore, many students these days turn to education loans to bridge the gap between them and their academic aspirations. These education loans come with a moratorium period. Let’s understand what the moratorium period in an education loan means and how it will impact students and other interesting aspects of education loans.
Key highlights:
- Why do Students Prefer Student Loans?
- What Exactly is the Moratorium Period in an Education Loan
- Some Ways to Pay During Moratorium Period in an Education Loan
- Why Paying During the Moratorium Period of an Education Loan Is Smart
Why do Students Prefer Student Loans?
Student loans empower countless students such as you to fund their education independently without depending on their parents. Moreover, you can access quality education by securing a seat at your dream university. You will no longer be required to settle for a less popular university or course.
Moreover, you do not have to liquidate your assets or family savings to fund your education. Savings are meant to be used during contingencies and can come in handy during situations such as health emergencies. When you opt for an education loan, you will be able to let savings be savings. Also, by repaying your student loans, you will build a healthy credit score. It will enhance your creditworthiness among financial institutions, which will enable you to unlock several benefits when you opt for other products such as a home loan, car loan or credit card.
Also Read: Everything You Need to Know About Education Loan Repayment
What Exactly is the Moratorium Period in an Education Loan
So, let’s understand the moratorium period meaning in an education loan. Student loans often come with a moratorium period, which is also known as a holiday period or grace period. It refers to the time between the student loan amount reaching you and when you make your first EMI payment. It’s the time during which you are not obligated to make payments to repay your education loan. The duration of this grace period can vary depending on the financiers. At Avanse Financial Services, we offer a holiday period of up to six months after you complete your course or up to three months after you secure employment, whichever is earlier.
Please remember this holiday period is not an interest-free period, and interest begins to accrue from day one. Therefore, at Avanse, we advise our student community to make contributions in the form of simple interest (SI)/ partial interest (PI) during the moratorium period of an education loan. Paying education loan moratorium period interest also instils financially prudent habits.
Some Ways to Pay During Moratorium Period in an Education Loan
- Simple interest servicing during the course: You can pay simple interest when you are studying.
- Partial interest servicing during the study programme: Partial interest can be paid during our academic journey.
- EMI payments during the course: You can make regular EMIs during your course, too.
Also Read: How to Get an Education Loan: A Brief Guide
Why Paying During the Moratorium Period of an Education Loan Is Smart
Planning your repayment journey from the day you decide to opt for an education is extremely crucial as it has a direct impact on your credit score. Small payments in the form of SI/PI can go a long way toward repaying some portion of your student loan.
Apart from making payments during the moratorium period, other effective repayment strategies can immensely help you. When you plan to opt for an education loan, you can use online tools such as the EMI education loan calculator to understand the estimated EMIs, the College Course Expense Calculator to find out your potential college expenses and the Education Loan Eligibility Calculator to know the student loan amount you are eligible to borrow based on your current finances.
Also, it is of utmost importance to select a well-ranked and prestigious university that offers you the course of your choice. This will ensure you develop the knowledge and skills required to accelerate your career, which will eventually empower you to bag a lucrative package, allowing you to repay your student loans.
Moreover, you can also build an emergency corpus to continue paying your EMIs even during situations such as a pandemic. So, design & religiously follow a budget, spend judiciously and set some amount aside for emergencies.
So, whether you want to opt for an educational loan for abroad studies or to study in India, starting repayment during the moratorium period is essential. If you have any questions, please feel free to contact us.
