Everyone thinks the most important things you should have to pursue higher education are dedication, will power and brains. But, higher education requires something even important, money. That’s right; higher education requires money, a lot of it, and education loan is the best way to get it. Education loan provides students with the amount required to complete their education. It even covers expenses such fees for library and laboratory along with tuition fee, accommodation fee, and equipment among other things. You do not have to pay back the education loan in a short period of time after completing your studies. In fact, education loans can have up to 15 years of tenure. Despite all of its advantages, education loan interest rates are very high. The reason that banks, NBFCs, and online lenders charge high interest rate is because there is a higher level of uncertainty regarding the repayment of the loan. Sometimes the student may be unable to complete education or secure a well-paying job.
So, if the situations mentioned above do arise, what would be the course of action of the lender? Well, let’s find out:
Education Loan Repayment
As mentioned, the high level of uncertainty leads to a higher education loan interest rate. So, if the risk is higher for the lender, it means that there is cause for concern for the applicant as well. Education loan repayment requires financial planning that is meticulous and covers various unforeseen circumstances covering over a decade in the future. It is necessary to ensure that the loan is repaid along with the interest.
But, if education loan repayment cannot be done in the required tenure of the loan, then you will be facing severe consequences. The consequences of failure of repayment are dependent of three situations. Each situation is dependent on the amount of the loan availed by you.
Education Loan Amount is below 4 Lacs
The education loan availed by you is below 4 lacs. It means that the principal amount is low enough to warrant any security or collateral. Additionally, in most of the cases the loan would not require a guarantor. In this particular case, you will be sent notices by the lender initially followed by warnings. However, if you still do not comply and start making payments, you will be declared a defaulter. Your credit score will decline rapidly once you become a defaulter. Additionally, you will be added to the CIBIL’s list of defaulters. It will ensure that you do not get a loan in the near future, or until your credit score is good again. As a result, you will find it tough to secure any sort of loan for a considerable amount of time.
If the Loan warrants a Guarantor
Some lenders do not approve loans unless the loan has a guarantor. Generally, the guarantor either has good standing with the lender or has a good credit score. If your loan does have a guarantor, then you may be able to get a lower education loan interest rate. Additionally, you may also have an easier time during the approval of the loan. However, if you are unable to make education loan repayment, then the lender will send you and the guarantor notices and warnings. If you both fail to comply and start the repayment, then the lender will send notices to the guarantor again. However, if the loan is defaulted, then credit scores of both you and the guarantor will take a huge hit. Additionally, both you and your guarantor may be included on CIBIL’s defaulter list.
If there is Security or Collateral involved
The amount of the education loan could be so large that lender might feel that it warrants an asset to be mortgaged as collateral or security. It may allow you to avail the loan at a lower education loan interest rate. The interest rate also depends in the value and type of asset you mortgage. If you are unable to make repayment on your education loan, then you will receive notices and warnings from the lender. If you fail to comply with the same then the lender is legally entitled to the assets you mortgaged. Your property or asset can be auctioned or used by the lender. It goes without saying that you will also be added to CIBIL’s defaulter list of CIBIL and your credit score will plummet.
Instant Education Loan with PaySense
Education loan interest rate makes repayments hard as there are a lot of uncertain elements. On the other hand, if you fail to repay the loan, you could face severe consequences. Click here to know the best time to start repayments to ensure that your education loan is repaid. If your requirement of loan is for a small amount then going to the bank to experience all the painstaking long processes is not the best idea. Instead, download the PaySense app and avail up to INR 2 lacs. In addition to instant approvals, you will not need to put anything as collateral or security.
Apply for Loans of upto ₹5 Lakhs easily using your phone or laptop, and pay back on low EMIs