Got student debt? Here’s how you can ease your repayment

Moratorium period also known as EMI holidays starts once the loan has been disbursed to the borrower. You don’t generally have to pay EMIs during moratorium period. However, you should not overlook the interest that keep accumulating during this period, which then adds to the loan amount, inflating the EMIs. Therefore, if you are an earning individual or parent, start paying off interest during moratorium period in order to prevent education loan from getting any bigger.

Moreover, if you service all the interests, you may be able to avail additional concession of up to 1 percent on education loan. For instance, Bank of Maharashtra offer 1 percent interest concession to the education loan borrowers, however the interest concession is available only during the moratorium period. It also offers 0.50 percent concession to its existing home loan borrowers. Hence, to avail such offers make sure to check with your lender and get clear idea about all benefits available with education loan.

If you are facing difficulty to pay off EMIs, you can choose to restructure your loan. By doing so you, you extend the tenure of the loan and reduce the EMIs. However, keep in mind that extending the tenure of loan also increases your total interest pay-out making the loan more expensive. Also, you cannot extend the education loan tenure beyond 15 years in total. Remember that additional charges could be levied to restructure the loan, like documentation and administration charges.

You may opt to switch lender if you are not able to pay off the EMIs due to high interests on loan. You can enjoy a lower interest rate, by choosing lender that offers better deal on education loan. Keep in mind that most lenders and financial institutions take repayment history of 12 months into consideration while evaluating the applicant’s eligibility for balance transfer. Hence, it is always recommended to pay your EMIs on time and maintain a clear credit record.

Also, do not forget to compare interest and term offered by different lenders before making a choice. Also, you may have to pay additional charges to switch lenders, such as credit report, documentation, processing charges, etc, where for instance, processing charges for domestic education loan could be up to 2% of the loan amount. Therefore, while planning to switch lender, make sure to include all the charges involved in the process, and evaluate total amount that you would have to pay after switching lenders. If your total repayment amount is higher, then you should continue paying off loan with the existing lender.

Opting for a step up loan allows you to pay lower EMIs during the initial years of repayment period. In other words, you pay lower EMIs in the beginning and higher ones at the end, which makes step up loans ideal for people who expect their income to increase at regular intervals.

Avoid taking loan from a lender that does not offer Step-up repayment mode, as you would be forced to pay bigger EMIs in the beginning, which would further increase the risk of loan default. You might also feel the need to take another loan to tide up the situation, which would only increase the burden.

You can request your lender to defer payment for a few months. By deferring the payment, you get to pause the outgo of EMIs for a few months. This option is ideal for people, who are expecting a lumpsum or financial windfall in near future. You can use this brief pause in EMIs to increase cash flow and re-establish your financial stability.

However, you should not opt for payment deferment if you are in a situation where you are not sure about your financial conditions in the future.  Also, keep in mind that a lender may levy penalty for delayed payments, which could be up to 24 percent per annum or up to 2 percent per month.

Besides, if your bank or lender does not offer any of these facilities or even before availing any of the above options, you are recommended to talk to your existing lender and explain your financial conditions and expectations. In order to retain you, the lender may offer you favourable terms on the on-going loan. Consulting your existing lender would also save you from paperwork and additional costs.