Education Loans Advantages and Disadvantages

Education loans are loans taken out to pay for the higher education of a student. These loans usually provide cover for tertiary education costs, textbooks and accommodation.

Banking institutions as well as micro lenders offer education loans. Interest rates are calculated according to individual creditworthiness and affordability.

Knowing the advantages and disadvantages of education loans can help you be a smart borrower.

The most important thing to keep in mind is that you should borrow only what you need.

Education Loans Advantages:

These loans help to fuel the educational goals of a student by financing the expenses incurred. Not all people can afford to pay for their tertiary education using cash upfront, so it helps to have access to education loans.

The costs of tuition fees, books, travel expenses and equipment costs are covered. As a student, all you have to worry about is your studies. Many lenders offer a grace period, allowing students to gain employment before they are required to repay the principal portion of the loan.

Flexible repayments are offered. Many lending institutions give individuals a chance to repay the interest portion of the loan while they are studying. The principal portion of the loan may usually be paid back after studies have been completed.

These loans often have hassle-free processing, so students don’t have to worry about qualifying criteria being too strict.

What are the disadvantages?

Interest rates may be variable, which means that you will have to deal with rate fluctuations. Instalments won’t be consistent as a result and careful budgeting will be required.

Repayment default could have an adverse effect on your credit record. Just like any other loan, education loans require diligence. Repayments must be made on time to avoid negatively affecting your or your surety’s credit record.

Education loans have to be repaid whether you graduate or not.