Getting an education loan is easy but paying off needs meticulous planning. After completion of education, it becomes a matter of concern for students to pay off the education loan as quickly as possible. For a scrupulous repayment, it needs sacrifices, discipline, patience and a little bit of strategic planning as well. Smart repayment, of course, helps students to save on the interest they pay towards the loan.
Other than the smart planning, there are a few excellent ways to avoid unnecessary outflows when repaying your student loan.
While still continuing your education in the university or the college, it is wise to find a part-time job as per your schedule. Saving some amount from the part-time job will help in a great way to ease up the whole process of loan repayment.
You need to make a 4-5 years plan to repay the education loan. While continuing your education, you need to make a plan as to how much you will have to pay each month towards your education loan. Create targets for your savings so that you can meet the payments schedule.
You need to put in bit extra money along with every installment that you pay towards your repayment. Doing this regularly will help you save on interest through the entire period of your student loan. You could save considerably on interest in the long run if you adopt this practice.
Enabling automated payment system is another way to enforce not only payments but also savings. It is always wise to make an arrangement for automatic payment to be made towards your student loan at regular intervals. The amount paid and the interval at which such payments must be made can be pre-decided by you. This practice can also get you a lowered interest rate from the side of the lender. It could have a substantial impact on the interest amount through the life of the loan.
In a situation where you have multiple student loans to pay off, some with variable interest rates and others with fixed interest rates, it is wise to pay off the variable rate loans faster. Even if the current variable rate is lower than the fixed rate, this is sensitive and susceptible to change. A sudden hike in the interest rate following changes in the economy may catch you off guard.
As part of compensation, some employers agree to pay a lump sum amount towards your student loan at the time of hiring. Such agreement also in a great way helps students pay back their education loan. It may include a reduced salary amount and other employment terms but it is better.
As part of their policy, banks insist on a term cover/insurance in the name of the borrower. The risk cover should be equivalent to the loan amount, which will take care of the repayment if something happens to the borrower.