As it is rightly said studying abroad is an adventurous experience. Mostly, this experience brings a lot of new exploration and at times this exploration begins even before you move countries. In this process, students often need to consider a lot of key aspects. One such aspect is the financial consideration. Among the many funding choices available, students mostly prefer to take an education loan.
Like any other loan, the process of taking an education loan is tedious and involves many steps. This makes it imperative for the loan applicants to be aware of the banking terminologies and one such terminology is the Moratorium Period. While this terminology sounds new for a layman, they often get confused about its implications.
Therefore, to make taking an education loan for students to study abroad less complicated, we have provided a detailed yet easy to understand insight on this important terminology the ‘Moratorium Period’. So, stay with us till the end as we familiarise you with this banking terminology.
In simple terms, the Moratorium Period is referred to as a specific duration during which the borrower is not obligated to make any repayments towards the principal amount or the interest on the loan. Since the loan applicant is exempted from paying the interest or any EMIs, this period is also known as an EMI holiday.
In an overseas education loan, the moratorium period usually covers the course duration and an additional job search period. The duration of the moratorium period differs from lender to lender. Nonetheless, this period provides the students with financial breathing space to focus on their studies before the loan repayments commence.
Loan applicants should be aware of the fact that simple interest is charged during the moratorium period, so this is not an interest-free period. Another notable aspect of this period is that for nationalised banks, paying the interest amount is optional, however, for other financial institutions like private banks and NBFCs the loan applicant will have to pay partial or full simple interest payments if the loan is disbursed.
Generally, the moratorium period comprises the course duration and extends up to six months to a year after the completion of the course. The additional period is given to secure employment; thus, it is called a job search period.
For better understanding, let’s give you an example of the Moratorium period. If your course duration is 3 years and your financial lender gives you an additional job search period of 12 months, then you will be granted a 4-year moratorium period. This is the maximum duration and your EMI for loan repayment will start immediately after the moratorium period. So, do your research properly and find the best bank for education loan for abroad studies.
Now that you have understood the basics of this important banking terminology for overseas education loans, let's move ahead and discuss its advantages.
It provides an invaluable breathing space for students to channelize their focus and efforts into academic excellence without immediate financial constraints.
Non-repayment during the Moratorium Period doesn't adversely impact credit scores, ensuring a healthy financial record for the future.
It offers a period for meticulous planning of post-education financial commitments, thus giving you a more organized approach to repayments.
Loan applicants are often confused between the terms Moratorium Period and Grace Period. To clear the air of doubt, you should know that both the terms are different. As explained above, the moratorium period is a duration in which the loan taker doesn’t have to pay any EMIs. In contrast, the grace period is a window to start repayments without incurring extra charges. Exceeding the duration of the grace period might lead to financial penalties on the loan applicant.
Now that we have a comprehensive understanding of the moratorium period, let’s proceed ahead to know some tried and tested strategies that can help you make the most of your moratorium period. Strategized financial planning can help you become debt-free quickly.
Create a Budget with a 50/30/20 Rule.
Make Realistic Savings Goals
Set Up Automatic Transfers for Bills
Utilise your Student Concessions and Discounts
Postpone Major Purchases if Possible.
Restrict Online Spending and Track Your Expenditure
Review and Cancel Unnecessary Subscriptions
Minimise Restaurant Spending and Cook at Home
Wrapping up this article, this is everything that you must know about this banking terminology. Understanding the concept moratorium period in an overseas education loan and making the most of this EMI holiday period is essential for a smooth financial journey that lies ahead. Furthermore, you can also explore the option of applying for a scholarship to study abroad for Indian students as this can significantly contribute towards reducing your study expenses.
Another important aspect of taking an education loan is to get the assistance of experienced professionals like an overseas education loan advisor. For a hassle-free overseas education loan experience, you can connect to our ELAN team. Our highly qualified advisors will guide you through this entire loan taking process to study abroad.
So, start your journey with Team ELAN today!