One of the best investments is in education. In most countries, students can take advantage of loans to pay for their tuition fees, books and living expenses.
In general, student loans have easier repayment terms than other types of loans such as personal loans and car loans.
Despite the easy repayment terms and low interest rates, student debt can still be a major challenge.
Unpaid student loans can damage one’s credit report and credit score for many years. It can make it difficult for an individual to get other loans, such as personal loans, mortgages and car loans.
Here are a few tips to clear student debt quickly.
1. Pay attention to the fine print and repayment guidelines
Take note of the details of a student loan. These include the interest rate, processing fees, minimum payment and the duration among many others.
There may also be other administrative fees such as disbursement fees, late payment fees, cancellation fees and repayment fees.
If one remains consistent with monthly payments, such extra charges will not be a worry but it would not hurt to be familiar with them.
2. Set a strict budget
Setting a strict but practical budget is important not only to clear student loans, but to become financially independent.
Assess needs and differentiate them from wants. Luxuries may have to be cut in order to achieve one’s financial goals. Prepare to make a few sacrifices until student loans are paid off.
3. Make timely payments
Depending on the loan and financial institution, there may be different options for a repayment plan.
Some banks allow the payment of monthly instalments of the principal amount and the interest even while one is still studying. If a part-time job can be squeezed in between classes, it will help get student debt out of the way more quickly.
Another option is to pay monthly instalments only on the interest while one is still studying. This type of repayment plan is ideal for full-time students. The monthly instalments on the principal start only after graduation.
Another option is to start repaying the loan after completing one’s studies. Some banks, such as RHB, allow deferred repayment. It allows the individual to focus on their education, but the monthly instalments will be higher after graduation.
No matter what the repayment plan is, always make timely monthly payments. A single late payment can damage one’s credit score.
4. Pay more than the minimum repayment required
If one can afford to make more than the minimum monthly repayment, then do so. This helps to lower the principal loan amount as well as the amount of interest to be paid over time.
It can also shorten the debt repayment period. To ensure that the extra amount is deducted from the principal, include a written request addressed to the lender.
This article first appeared in The New Savvy
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