For students who want to escalate their careers to the next level with overseas education, an education loan is a blessing. However, payment of these education loans is equally important for a successful career. Education loans are provided with a grace period which is actually helpful to the students in the long run. If you are the one who is planning to manage finances with an education loan to study abroad, this blog is just for you. In this blog, we will discuss the education loan payback time and the tips required for timely repayment of loans. Before understanding the details about education loan payback time in government banks and NBFCs, let’s have a look at the grace period also referred to as moratorium period.
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Understanding the Moratorium Period
This is one of the most important features of the education loan. The education loan comes with a grace period. It allows students to study abroad without any financial worries. The moratorium period is a period when the borrower is not required to pay the EMIs. It indicates that the borrower has a certain amount of time to plan finances and make payments.
In the case of an education loan, the moratorium period is usually the duration of the course plus 6 months or one year provided to the student for loan repayment. For example, if your course is for 3 years, then you’ll get your course duration i.e. 3 years plus 1 year which makes it 4 years. So, until 4 years your EMIs won’t start.
An education loan provides a student with an adequate amount of time to sort out the finances and strategy of education loan payback. The most important thing to remember here is that banks generally charge interest for the moratorium period. Simple Interest is charged by the banks for the entire duration of the moratorium period. This interest amount is later added to the principal amount.
There are various exceptions to the moratorium period as well. In the case of government banks, the student has the option to repay the education loan during the moratorium period. This means that the students who want to opt for the payment during the moratorium period can do so. The private banks generally don’t offer any choice of paying interest during the moratorium period. Be sure to check out the eligibility criteria for education loans and the terms and conditions before applying.
Also Read: Need help managing your education loan repayment? Check this blog and understand all about Education Loan Restructure!
Loan Payback Time in Government Banks
Government banks generally have student-friendly policies. They offer much time to the students for education loan payback. The education loan payback time in government banks is 12 to 15 years after the moratorium period. Generally, in government banks, the period of repayment starts one year after the completion of the course or 6 months after securing the job, whichever is earlier.
The accrued interest during the moratorium period and course period is added to the principal and education loan payback time is fixed in Equated Monthly Installments (EMI). EMI is always fixed on the principal amount only. You can pay your education loan earlier as well and there will be no penalty charges for the prepayment of the loan.
Loan Repayment in NBFCs
Education loan repayment in NBFCs is customised as per their loan policies and agreements. NBFCs also provide a moratorium period to the borrowers of education loans. However, there is a difference between the moratorium period provided by the government banks and NBFCs. The NBFCs don’t offer a zero payment moratorium period. Students are required to pay interest during their moratorium period.
NBFCs accept partial payments of interest during their moratorium period. They provide 10 years in total for education loan payback time. The moratorium period is included in the tenure loan payback tenure of 10 years.
Also Read: Interest Rate increased on existing education loan? Check this blog and know all about Education Loan Refinancing!
FAQs on Education Loan Payback Time
The grace period generally ranges from 6 months to one year after the course duration. For the exact grace period, be sure to check out the loan agreement.
Indeed, you can pay some amount of loan during the grace period. It may significantly decrease the rate of interest that is going to be charged after the moratorium period.
Plan your finances and search for work while studying opportunities. It will help you a lot in saving money while studying.
There are several tax benefits on the interest charged on the amount of the loan. You can avail these benefits under section 80E.
In case of financial crisis and failure of repayment of loan, be sure to reach out to your lender. You have the option to resettle the amount of the loan subject to your financial crunch.
Education loans actually play a vital role in managing finances while planning to study abroad. It is important to plan your finances in advance and pay your education loan on time.
To know more about the loan application process, the best bank accounts for students, forex and banking experience for global students, or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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