What Will Happen If I Don't Pay Back My Student Loan? Timely EMI

1. What Will Happen If I Don't Pay Back My Student Loan? Timely EMI

2. Everyone hopes for a profession that is financially rewarding. Graduating with honors from a reputable higher education institution is the first step in realizing this objective. But tragically, it takes more than just effort, focus, and commitment to realize this desire. Higher education expenses in India have increased significantly during the past ten years. The expense of student housing, rising tuition, and inflation make it challenging for parents to pay for their kids' ideal education. Here is where student loans become important.

3. Education Loans in India: An Overview Education loans in India can be obtained by either the student or his or her parent to help cover higher education fees. It is offered to students who wish to pursue higher education in India as well as students who desire to study in a college or university abroad. Education loans are available for undergraduate, graduate, and vocational programs. The following are the key benefits of taking out an education loan: 1. Section 80E provides income tax benefits on interest paid when repaying student loans. 2. Productive rate of interest - Female students also receive significant interest rate concessions, which lowers the overall debt load. While taking out an education loan, the government also provides subsidies for students from underprivileged castes and tribes. 3. While taking out an education loan, the government also provides subsidies for students from underprivileged castes and tribes. 4. Loans are readily available at all major banks and NBFCs. 5. Flexible payback period - One of the biggest advantages of taking out a student loan is the flexible payback period. With other loans, repayment starts as soon as the money is received; however, with education loans, repayment doesn't start until the student has finished their studies. In addition, students receive a 6-month to 1-year moratorium after completing the course. This time frame enables students to postpone loan repayment until they begin to make money. 6. Covers all costs - In addition to paying for tuition, education loans also cover the student's other incidental costs, such as those related to housing, books, and other expenses. Lenders differ in terms of the loan amount sanctioned and the interest rate levied. It is determined by numerous aspects, including whether you submit collateral, the credit score of the guarantor, and so on.

4. What if I am unable to repay my student loan? Everyone hopes to acquire a job and start earning money soon after graduating from college or university. Securing a fantastic career after graduation may not always be achievable due to reasons beyond our control. Uncertainty in the labor market, inability to find the proper job or failure to complete the course may hinder you from obtaining work immediately after college. Alternatively, a person may lose their employment, leaving him or her without a wage to return the EMI on time. In such cases, there is a considerable likelihood of defaulting on your student loan. Like any other debt, not making your education loan payments on time has a number of drawbacks. The repercussions of not repaying an education loan are numerous, ranging from a negative record on your credit report to losing your pledged asset. The repercussions vary determined by the amount borrowed, the type of loan, and so on. Let's examine what occurs in various situations when you are unable to repay the student loan.

5. What happens if I can't pay back an unsecured student loan? Unsecured school loans are typically approved by lenders when the loan amount is low—typically less than Rs. 4 lakhs. A borrower who needs a small loan amount can apply for an unsecured school loan without providing collateral or getting a co-signer. If this is the case, the lender would first send you reminders when you are late with your EMI payments. If you don't reply, the lender will consider you to be in default. Your credit score starts to swiftly decline as soon as you are labelled a defaulter. It gets more difficult for you to get new loans or credit cards as your credit score drops. Your credit score will stay low unless you pay the balance owing and all associated penalties.

6. What happens if I am unable to repay a guarantor-backed education loan? When you apply for an education loan, some lenders ask for a co-signer or guarantor. When the sanctioned amount is high, this is the situation. Furthermore, having a guarantor with a strong credit score makes it easier to obtain a mortgage and also allows you to take advantage of cheaper interest rates on loans. In this case, the lender initially notifies you and the guarantor via warning notices (s). The lender waits a certain amount of time before designating your debt as an NPA if neither of you responds or starts making payments (Non-Performing Asset). This has an impact on your credit score and your capacity to borrow money in the future, as well as the guarantors. The lender also initiates loan recovery processes, which have an immediate effect on both the principal borrower and the guarantor.

7. What happens if I don't repay a collateralized education loan? When the loan amount is large, certain lenders may demand the borrower pledge an asset/collateral. Furthermore, even though collateral is not required by default, pledging it can help you receive a reduced interest on an education loan. If you obtained an education loan by pledging collateral, the consequences of not repaying it on time can be significant. The lender initially notifies you when you don't pay your EMIs on schedule. The lender sends you multiple warnings if you don't respond and get the repayment back on track.  Even after receiving these numerous reminders, you still fail to respond, and the loan is labeled as an NPA. The assets or property you have pledged as collateral will subsequently be lawfully transferred to the lender. To recoup the cost of the debt, the lender may auction the asset or property. In addition to losing the property, the borrower also sees a decline in credit, which makes it more challenging for them to get loans in the future. As you can see, not paying back an education loan can have a number of bad effects, including a decrease in credit score, a negative entry on a credit record, and the loss of any pledged property. It is obvious that the borrower is not in a good situation.

8. When you default on your student loan, are there any strategies to prevent these bad outcomes? 1. Take the initiative and connect with the lender. Be proactive and let the lender know right away if you won't be able to make the next EMI payment on schedule. You need to start the conversation with the lender rather than the lender coming out to you and reminding you of the missed EMI. Describe your circumstance. The lender is more inclined to change the loan repayment plan if they think you are really having financial problems. Some lenders will even prolong the moratorium until you find employment. 2. Request a brief deferral of the payment. Deferments allow you to put the repayment schedule on hold for a set amount of time. For instance, if you lose your job, you can inform the lender of the circumstance and request a postponement of the payment until you find another one. 3. Change the lender for the loan. You can transfer an education loan to a different lender who provides lower interest rates if you're stuck with one with a high-interest rate. Alternately, you can change an unsecured student loan into a secured student loan, which lowers interest rates and lowers the cost of the loan overall.

9. End-Note The first debt a person typically gets after entering adulthood is an education loan. Therefore, it's a good idea to make sure that you pay off your EMIs on time in order to raise your credit score and preserve an excellent credit history. Remember that, while lenders are often tolerant when it comes to student loan eligibility, the repercussions of failing to make EMI payments are identical to those of other loans and should be avoided. Make use of the advice provided here to avoid sliding into an education loan debt trap.

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