Pay Off a Student Loan With A Personal Loan
Rajiv Anchalia is a post-graduate from one of the top B-schools in India. He recently started his career with a leading multinational company. While he earns a decent salary, he has an education loan to pay off.
He wants to pay back the education loan as soon as possible. A banker friend advised him to take a Personal Loan to pay off a part of his education loan. The idea is to be debt-free as soon as possible.
Higher education is getting more expensive day by day. So, taking a student loan is unavoidable. Like Rajiv, many youngsters are burdened with a loan even before landing a job. If you are in the same boat, check your Personal Loan eligibility once you start earning. This will help you pay off the education loan faster. Read on to know how a Personal Loan can help with your student debt.
Why is a Personal Loan a good option for Paying off your Student Loan?
- Take Complete Charge of your Finances and Debt
Usually, parents are the co-borrowers for a student’s education loan. Any default in the loan payment adversely affects their credit history. So, once you are able to repay the Personal Loan on your own, take charge of your debt. Release your parents from any obligation to repay it.
- Personal Loans have a Shorter Payment Tenure.
Education loans have long repayment tenures. Once you get a job with a decent yearly package, check your Personal Loan eligibility. You can take a loan to pay off the education loan. This helps you repay your debts as fast as possible.
- A Personal Loan has a Fixed Interest Rate.
Most education loans are on a floating rate basis. Any increase in the interest rate increases your EMI burden. This makes prepaying an education loan a top priority for many people. But Personal Loans have a fixed interest rate. If you avail a Personal Loan to repay your student loan, you escape the uncertainty.
- A Personal Loan is Dischargeable in Bankruptcy.
In case of bankruptcy, your Personal Loan becomes a dischargeable debt. As a borrower, you are no longer legally required to pay back the outstanding loan. In case of an education loan, your co-borrower and guarantor must pay it back.
- A Personal Loan is an Unsecured Loan.
Education loans depend on the credit history of the co-borrower and the guarantor. After a specified limit, you may need to provide collateral to avail a student loan. But a Personal Loan is an unsecured loan. It needs no collateral. Your annual income and credit history are key factors here. As it is an unsecured loan, a Personal Loan is considered less risky.
The bottom line
To sum up, a Personal Loan is favourable but it has some limitations. So, consider the pros and cons. Take stock of your financial position before taking a Personal Loan to pay off a student loan. Early repayment of the education loan should be your priority. Become debt-free as soon as you can!