Going to your dream college? Congratulations! You’re ready to begin your career and take it to the next level. Now is the time to plan how you’ll pay for that degree. If you decide to take a Personal Loan to fund your studies, it is essential to note that your student loans do not simply comprise the amount borrowed to pay your tuition fees. You need to take care of the interest rate on your Personal Loan, along with the principal repayment. The interest rate charged is discussed with the lender when availing of the loan. However, there are a few hidden costs that you need to be aware of.
So what are some of the hidden costs of education loans that you should be on the lookout for? Let’s find out.
When taking a loan, the institution where you are availing the loan will charge a small sum for processing. It is a one-time fee paid to ensure the smooth processing of the debt undertaking.
Another aspect of a personal loan processing includes documentation and stamp duty. The stamp duty varies according to your state, but the requirement is prevalent all across the country.
Unable to make your payment towards the loan this month? Get ready to be penalized for it. Banks and financial institutions charge a late fee for delayed payment, and the delay can also hamper your CIBIL score. It can affect your ability to take on additional loans in the future for personal or professional reasons.
Loan Rescheduling Fees
Won’t be able to pay your due in a few months, but want to get around the late fees while keeping your CIBIL score intact? If you are aware of a future inability to pay your dues, you can inform the lender and reschedule repayments. While this is a cost as well, it is certainly cheaper than the penalty levied for missing a repayment.
Okay, yes, I understand the apparent downside of missing a repayment. But why would I be charged for prepaying my loan? It’s pretty simple. Lenders don’t want to lose out on income earned from interest payments. While this was largely prevalent until a few years back, the RBI has ruled that banks will not charge for early repayment on education loans.
Your loan can either be at a fixed or a floating rate. You can convert from a fixed rate to a floating rate during the loan tenure and vice versa. Depending on the prevailing interest rates and the loan rate offered by the lender at the time, you can decide upon the rate you want to opt for. However, conversion of the rate will carry additional charges. You should pay the conversion charges if you feel a revised charge will be more beneficial during the loan tenure.
A few other costs not covered above include loan cancellation charges, modifying the repayment account, charges for cheque bouncing, and charges to get account statements.
It is vital to make sure you keep all of the additional charges in mind while taking a personal loan to fund your studies. A Personal Loan EMI Calculator will help plan your repayments effectively, thus ensuring you do not pay additional unforeseen charges.