Education loans are a great way to finance your education, especially when your financial situation does not allow you to pay for it upfront. But with any loan, including an education loan, repayment is essential. It is very important to manage your expenses and monthly budget in a way to repay the education loan EMI promptly. This ensures that your education loan does not become a burden.

In this article, we'll discuss some tips on how to repay your education loan on time:

Create a Budget

Budgeting is key to keeping a tab on your monthly income, managing your expenses, and prioritising your loan payments.

Once you have a clear understanding of your monthly expenses, you can allocate a chunk of your income toward paying off your loan. Make sure to set aside your EMI for the education loan to avoid any penalty charges.

Choose a Repayment Method

Different lenders offer various repayment methods on education loans, such as equated monthly instalments and interest-only payments during the course.

Equated monthly instalments are designed to take a huge financial burden off the borrower by allowing them to repay a particular amount every month (pre-decided by the lender). In the interest-serving period, students can opt to pay partial interest during the moratorium period. Choose a plan that suits your financial situation and allows you to make regular payments.

Make Timely Payments

This is the most simple but very important point that should never be overlooked. Repaying your education loan involves making timely payments. Late payments can result in additional fees and negatively impact your credit score, which will further diminish your financial flexibility.

It is always a good idea to set up automatic payments with your lender or create reminders to ensure you don't miss any payments. If you are not able to make your payments, contact your loan servicer to explore alternative repayment options.

Look for Additional Income Sources

In today’s day and age, having multiple sources of active and passive income helps you reduce your financial burden. Any additional income you make can be used to pay off your loan faster and reduce your debt burden. You can deposit a lump sum in the loan account to pay off your debt before its maturity date.

Refinance your Loan

If you have taken an education loan from a financial institution where you are not getting the expected benefits and the interest rate is a bit higher, looking for loan refinancing is a viable option. Many NBFCs offer several benefits and competitive interest rates that can help you save money in the long term.

Use Tax Deductions

Interest paid on education loans is tax-deductible, which can help you save money. You can claim a tax deduction on the interest paid on your education loan, depending on your income level. Make sure to read about the provision for a tax deduction in the Income Tax Act in India before making an informed decision.

Avoid Default

Defaulting on your education loan can have serious consequences, such as a damaged credit score and legal action. Don't skip your loan payments, as they will only accumulate and make it harder for you to repay your loan in the future.

If you plan your budget properly, you can effectively manage your education loan and achieve financial stability.