Impact of Moratorium and Grace Periods in Education Loan Refinancing: A lot of students in India rely on education loans to study abroad for a better career. However, it is very important to understand every terms and conditions and the repayment structure of the loan. While obtaining an education loan is essential for pursuing higher education, repaying these loans can be a difficult task if not planned well. Sounds apprehensive? No need to worry.
Fortunately, education loan refinancing with features like moratoriums and grace periods significantly impacts students’ ability to manage their financial obligations. Let’s discuss how exactly moratoriums and grace periods affect education loan refinancing.
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What is a Moratorium or Repayment Holiday in Education Loans?
Rishi got admission to a postgraduate program at Oxford University. He took an education loan of INR 20 lakhs to pay the tuition fees and accommodation costs. The duration of his course is 2 years. The repayment of the loan will start after the completion of the course. Even if ‘A’ doesn’t get a job immediately after completing the course he will get 1 additional year before the repayment of the loan starts and this is called the grace period in moratorium. This period of course duration + 1 year is called the moratorium period or repayment holiday which is allowed by the bank and it doesn’t affect your credit score. However, banks may charge simple interest during a moratorium subject to terms and conditions.
Also Read: Understanding Credit Score and Its Impact on Education Loan Refinancing
Impact of Moratorium and Grace Period on Education Loan Refinancing
Moratorium and Grace Periods in Education Loan Refinancing aims to reduce your immediate financial hardship as you are not obliged to make the loan repayment during this period. For example, if you have chosen SBI Education Loan takeover you have an option of getting a top-up loan after refinancing to pursue further with an extended repayment period for that course. Your repayment will start after the course duration + 1 year or 6 months after getting the job, whichever is earlier. Let’s understand properly the impact of the moratorium on Education Loan Refinancing:
Reduced Immediate Financial Pressure
Alex was admitted to Boston College in a 2 year MBA program. After two years he didn’t get a job from the campus and started looking for better opportunities there. Now if there is no moratorium period he will be liable to repay the loan and it will be very difficult to manage EMI payments. Hence, the moratorium and grace periods provide students with the much-needed breathing space to focus on their studies and to look for suitable job opportunities for a longer period without worrying about immediate loan repayments.
Also Read: Demystifying Education Loan Refinancing for Indian Students
Career Development
After completing their courses, students can use the grace period to find suitable job opportunities and secure a stable income source. Most of the banks in India provide a year grace period apart from the course duration. During this period students can look for better job opportunities without worrying about loan repayment. Your credit history also has no impact during this particular period. Even if you get a job immediately after the course you get 6 months grace period before starting the repayment. With a job in hand, students are better equipped to start repaying the loans without compromising their standard of living.
Financial Planning
Financial planning is very important especially when you have a debt to pay. The moratorium period and the the grace period allow you to plan your finances, budget for future loan repayments, and get a clear picture of your financial responsibilities. During the moratorium period, you can even choose to pay the interest accrued for that period which will ultimately reduce the loan amount. After getting a refinance you will have to pay lesser EMI and you start saving money this way.
Loan Affordability
There are a lot of factors which you need to consider before deciding on education loan refinance. The availability of these periods makes loan refinancing a more attractive option for students as it eases the initial financial burden. You can even continue your study further without worrying about repayments as you will get extended periods in education loan refinancing. Moreover, the lower interest rates offered during refinancing also contribute to making loan repayments more affordable.
FAQs
If you plan to study more and have already started repayment of your existing education loan you can get an education loan refinancing with extended repayments and moratorium.
The bank charges simple interest on your loan during the moratorium.
The major purpose of a moratorium is to provide temporary financial relief and to avoid loan defaults without affecting the credit score.
Education loan refinancing with moratorium and grace periods can be a game-changer for students in India. It not only relieves immediate financial pressure but also empowers students to pursue their education and career goals more confidently without worrying about repayment.
To know more about the education loan refinancer, 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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