Planning higher education abroad is a good way for career enhancement. Considering the growing competition and soaring inflation, funding higher education abroad has been a challenge for many aspirants. However, no other investment bears a higher return than the investment in education. Taking an education loan has become a kind of investment for students who aspire to study abroad. So even if a student is unable to afford to bear the expenses of foreign education, there is future earning potential that they will get into a good job.
Education loans provide good financial backing so that students can focus on their studies without worrying about money. Moreover, there are numerous advantages of taking an education loan. The process of taking an education loan doesn’t end with the loan disbursement. In fact, the responsibility for loan repayment begins once your moratorium period ends. Loan repayments are a crucial aspect of the education loan process. If the loan applicant couldn’t pay back the loan amount, then there are certain consequences for this.
Considering the importance of the repayment aspect of loans for higher education abroad, let us discuss this in detail. Keep reading!
Education Loan Repayment
Education Loan Repayment Policies
In an education loan, a moratorium period is given to the student by the financial lender. The moratorium period basically consists of the course duration plus 6-12 months, depending on the financial lender that you choose. During this period, the student won’t have to pay the loan interest. However, for some lenders, the students would have to pay either full or partial interest during their moratorium period.
Once the moratorium period ends, your EMI for loan repayment will begin. As per the loan amount disbursed, the lender will generate the EMIs and schedule a date for the EMIs.
After the commencement of your loan repayment, you will have to timely pay back the required loan amount. If you miss your EMI, you will have to face certain consequences.
Read on to know these consequences.
Consequences of Delay in Education Loan Repayment for Studying Abroad
If as a loan applicant, you miss your EMI by 1 day to 30 days, then your financial lender will report this delay to the credit bureau and it will be reflected as Days Past Due (DPD) on your credit report. If this delay continues for a longer period, then it would affect your CIBIL scores and have serious consequences for your future.
So let us discuss these consequences in detail.
• Low CIBIL Score
Missing EMIs will affect your CIBIL score. Over time missed EMIs will lower your CIBIL scores and further reduce your creditworthiness significantly. This low CIBIL score will become a hurdle for your future loans, and you might be charged higher interest rates as well.
• Extra Penalty Interest
For every missed EMI, you will be charged a penalty. This penalty will be in addition to your loan interest. Over time, all these extra penalties will result in you paying back a much higher loan amount to the financial lender.
• Loan Disbursement Issues in the Future
The long-term impact of delayed EMIs is that your poor credit rating will impact your individual credibility. It will also result in having your name as a defaulter to various credit information agencies like Credit Information Bureau India Ltd (CIBIL). Such situations will reduce or close the chances of getting a loan from any financial institution in the future.
• Co- borrower’s Creditworthiness Declines
The majority of education loans in India for study abroad require you to have a co-borrower or a guarantor. In case of failure of loan repayment, the co-borrower will have to bear the responsibility of loan repayment. Since the co-borrower is also responsible for the education loan repayments, delayed EMIs will reduce the creditworthiness of the co-borrower as well.
• Cannot become a Loan Guarantor to your Family and Children
Your bad credit rating will take time to improve. This will make you among the risky borrowers. As a long-term result, you will not be able to become a loan guarantor or a co-borrower for your family and future children. So, the consequences of delayed EMIs will affect the next generation as well.
• Pan Card History will get Affected
Every missed or delayed EMI will reflect in your Pan Card history. Considering that the Pan Card is significant documentation for various purposes, this history will have a long-term effect on your creditworthiness.
As we have discussed the consequences of delayed EMIs, let us discuss the measures that can lessen the chances of delayed EMIs.
Effective Measures to Lessen the Risk of Delayed EMIs
• Set the payment due date as per your salary date.
• Use the autopay feature.
• Set alarms for your EMI repayment.
• Save money beforehand for the next EMI.
• Avoid taking too many loans at the same time.
Following these measures will surely lessen the risk of delayed EMIs for your education loan. Furthermore, you won’t have to face the consequences of missed EMIs.
On a concluding note, loan repayment is a vital aspect of the loan process. We recommend you discuss this aspect with our experienced Overseas Education Loan Advisors at ÉLAN.
Our expert advisors will explain the education loan processing in detail and provide you with affordable funding options from suitable financial lenders. To know more about the loan providers, reach out to ÉLAN and get all your queries resolved.