3 Reasons to Prefer Education Loan over Self Finance

Education Loan over Self FinanceLiving in a foreign country, especially a developed nation can be quite expensive. Many students and their parents are hesitant to borrow money from banks and other financial lending institutions. However, it is your best bet when you have a financial crunch and wants to meet the costs of an expensive educational program.


Here are a few conventional self finance solutions for students and the reasons why education loan is better than them.


1. Financing from Parents may add up their Burden:

 

Borrowing from parents is an easier process than borrowing from banks. However, by doing so you are utilizing their hard earned money, which may help them lead a better life during their retirement years. Most parents willingly offer their Pension Protection Fund and other savings to help their children fulfill their dreams. Remember – they may be able to spare money at the moment, but they too may encounter financial emergencies in future. This will make their life vulnerable and will pressurize you to repay the amount faster than you expected.


2. Selling Property or Gold May Lead to Poor Money Management Skills


Investment in gold and real estate is a secure wealth creation strategy. Students may not realize the value of preserving these assets if they are given the opportunity to sell them and may fall into a cycle of doing this as and when they face financial difficulties. As banks have a regular repayment schedule, interest rates and penalties, a student who depends on education loan for studies would eventually develop better money management skills.


3. Borrowing from Friends and Relatives May Jeopardize Personal Relationships


Borrowing from family and friends can lead to strenuous relationships if you fail to pay up or the repayment becomes inconsistent. Also, the downside of accepting a financial aid from a family member is that you may feel obligated to him or her throughout your life. It is important to make clear that the right to make decisions about your career and future strictly is yours and not the lender. Also, most lenders expect you to pay back a lump sum rather than installments, which would make it extremely difficult for you during the early years of your career.


The greatest advantage of an education loan when compared to conventional self finance solutions is the deferment of repayment. The repayment process begins only after completion of your educational program. Unlike most loans, banks offer low fixed interest rate for student loans and have easier terms and conditions. The education loan would not only help you meet your financial requirements, but also provide you tax benefits during repayment. If you have proved yourself to be a responsible borrower with your education loan, your chances of approval for other loan applications in future will be high.


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