Everyone thinks the most important things you should have to pursue higher education are dedication, willpower and brains. But higher education requires something even important, money. That’s right; higher education involves money, a lot of it, and an 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 as fees for library and laboratory along with tuition fees, accommodation fees, and equipment fees, among other things. You would not have to take a separate laptop loan with a robust study loan. You do not have to pay back the education loan in a short period after completing your studies. 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 rates is that 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, while there are many benefits of an education loan, if the situations mentioned above do arise and you cannot pay your EMI against the loan, what would be the course of action of the lender? What education loan repayment rules do we have in India? Well, let’s get to it:

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 meticulous financial planning and covers various unforeseen circumstances covering over a decade in the future. It is necessary to ensure that the loan is repaid along with interest.

What Happens If Education Loan Is Not Paid in India

So, if you take an education loan, and the 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 on three situations. Each situation is dependent on the amount of the loan availed by you. Below are the three potential consequences of not paying education loan in India:

  • Situation 1: Education loan amount is below 4 lakh
  • Situation 2: Loan warrants a guarantor
  • Situation 3: There is a security or collateral involved

1: Education Loan Amount is below 4 Lakh

The education loan availed by you is below 4 lakh. It means that the principal amount is low enough to warrant any security or collateral. Additionally, in most 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 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 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.

2: 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, you may 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 an 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 defaults, then the 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.

3: If there is Security or Collateral involved

The education loan amount could be so large that the lender might feel that it warrants an asset to be mortgaged as collateral or security. It may allow you to avail of the loan at a lower education loan interest rate. The interest rate also depends on the value and the 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. You will also be added to CIBIL’s defaulter list of CIBIL, and your credit score will plummet.

According to the industry experts while a better education loan availability is a good thing for students, you must carry out ‘due diligence’ before taking an education loan. You must make sure that the education you are taking will help you repay the loan.

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 loan requirement is for a small amount, then going to the bank to experience the long and painstaking processes is not the best idea. Instead, download the PaySense loan app and avail instant personal loan up to Rs. 5 lakh. In addition to instant approvals, you will not need to put anything as collateral or security.

FAQs

How to repay an education loan? 

Education loan repayment is not an extensive process. You can contact your bank manager or lender, who will note your account details and start your repayment on an auto deduction mode.

How do I get education loan?

– You can get education loan from banks and digital lenders. Some of the banks offer lowest education loan interest rates. You also have education loan for CA students as directed by ICAI.

What happens if you cannot pay an education loan? 

If you cannot repay your education loan, you will get notices and warnings from your lender. If you fail to comply with them, you will be declared a defaulter. It will be then tough for you to secure any other kind of loan for a considerable time.

What happens if I don’t pay my education loan in India?

If you do not pay your education loan in India, the lender will start sending notices to you and your guarantor, if there is one. If you fail to comply with the warnings, you will default on your loan, and your credit score will take a huge hit. You would not be able to secure any loan in the future for a long time.

How can I escape my education loan?

– You cannot escape your education loan without suffering from its consequences.