Non-performing assets (NPAs) are a significant concern for banks and borrowers. For international students studying abroad, an education loan becoming an NPA can lead to severe financial and academic consequences. The banks and financial institutions may take legal action if you fail to pay the loan as per the schedule. If your loan account has become an NPA (Non-Performing Asset), it is important to know how to remove NPA from education loans.
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What is an NPA in the Context of Education Loans?
An NPA (Non-Performing Asset) occurs when a borrower fails to make scheduled repayments for a period, typically over 90 days. For example, if you have missed 3 consecutive payments of EMIs, then your account will be considered as NPA. NPAs can result in penalties, a negative impact on credit scores, and difficulties obtaining future loans. It can affect your future loans and advances.
Also Read: Check here all the details on some of the best banks in USA for international students
How to Avoid NPA Status While Studying Abroad?
Timely communication with your lender is one of the best ways to avoid any irregularities and difficult financial situations. Inform your bank if you’re experiencing delays in finding employment or if your financial situation changes. Check some more useful suggestions below:
- Request an extension if you need more time to start repayments. Many banks are open to restructuring loans for students studying abroad.
- Education loan restructuring can help you to make your loan cheaper and reduce your monthly EMIs.
- Optimize remittance options to reduce currency conversion losses, especially if you’re earning in a foreign currency. This will help you to save more money and start repaying the loan.
Steps to Remove NPA Status from Your Education Loan
You can remove the NPA status of your loan account by contacting your bank and explaining the financial difficulties we are facing. Check some of the major steps involved in removing NPA status from education loans:
- Contact Your Bank Immediately: Initiate a conversation with your bank’s NPA or recovery department. Let them know your current financial status and willingness to clear the overdue amount.
- Negotiate a Restructuring Plan: Banks often allow for education loan restructuring. This can include extending the repayment period or adjusting monthly EMI amounts to match your current income.
- Partial Payment Strategy: If unable to make full repayments, arrange for partial payments. Demonstrating commitment can encourage the bank to reclassify the loan as “standard” once consistent payments are made.
- Seek Help from Financial Counsellors: Many banks provide counselling for students on managing debt. Financial consultants specializing in education loans may also advise you on effective repayment strategies.
Also Read: Check here all the details on student loan interest rate and find out the best education loan product for you
Special Programs and Waivers Available for NPAs
Some banks, under RBI guidelines, offer rehabilitation packages or loan recovery plans for students unable to meet education loan repayment due to unforeseen circumstances.
The banks may offer reduced one-time settlement offers to the students and provide sufficient time. Depending on the bank’s policy, a one-time settlement could be negotiated, where the bank agrees to accept a lump sum lower than the total outstanding balance to close the loan.
Clearing an NPA from an education loan is possible with the right approach and timely action. You can effectively manage and even remove NPA status from your loan by staying informed and prepared, communicating with your bank, and exploring all available options. Check some FAQs on how to remove NPA from your education loan below:
FAQs
An NPA (Non-Performing Asset) occurs when a borrower fails to repay the loan for over 90 days. This status can lead to penalties, legal action, and a negative impact on your credit score.
To avoid NPA status, communicate with your lender about any financial difficulties. Request loan restructuring, optimise your remittance strategies, and ensure timely repayments to maintain a healthy loan status.
Contact your bank’s recovery department immediately and explain your financial situation. Show your willingness to repay and negotiate a repayment or restructuring plan.
Yes, banks often offer loan restructuring options, such as extending repayment terms or lowering monthly EMIs, to help borrowers clear overdue amounts.
Partial payments can demonstrate your commitment to clearing the debt. Consistent payments may convince the bank to reclassify the loan as “standard.”
Under RBI guidelines, some banks provide rehabilitation packages or one-time settlement offers, allowing borrowers to pay a reduced amount to close the loan.
Loan restructuring involves extending repayment terms or lowering EMIs based on your income. It helps make repayment more manageable for borrowers.
Yes, financial counsellors can guide you on debt management and repayment strategies, ensuring you make informed decisions to clear your loan.
In a one-time settlement, the bank accepts a lump sum payment lower than the outstanding balance to close the loan. This option depends on the bank’s policy.
An NPA negatively impacts your credit score, making it harder to secure future loans or credit. Resolving the NPA promptly is crucial for maintaining financial credibility.
To know more about education loans, 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.
