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The Survival Guide to Manage Education Loans Better

Jun 28, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

The cost of education has drastically increased over the last decade. With increasing competition and the aspirations for a successful career, as parents, we want our child to pursue his/her dreams, and join premier institutes or Ivy League colleges.

Despite the savings we make, there remains a shortfall due to our ever-increasing expenses, not to forget the rate of inflation!

One of the ways to bridge this gap is getting an education loan with a fixed interest rate. Apart from that, here are 7 useful tips on education loans, the dos and the don’ts to help you manage these loans wisely:

  1. Pick the right loan: Before you apply for an education loan, gather all the relevant information about the eligibility criteria, documentation process, interest rates, options of repayment and other terms and conditions related to the loan. If you have detailed information, you can plan for your finances with ease. Choose a loan that has flexible repayment tenure and low interest rates.
  2. Go small: When providing education loans bank pay the applicant with a lump sum amount, the loaned amount comes with an interest rate, which is charged monthly once the EMIs start. Thus, choosing an institution with low tuition fees can help you save a lot. Whereas, some banks charge interest rate only on the amount used by the applicant.
  3. Build a realistic repayment strategy: One of the simplest education loan management tips to follow is to build a repayment strategy. You need to build a realistic repayment strategy keeping your financial condition in mind. Repayment of the loan will begin six months to one year after the completion of education. Banks usually charge a simple interest on the loan and this payment during study period also reduces the EMIs for future payments. Hence, an amount paid during the study period will reduce the amount of EMIs in the future.
  1. Manage the finances: To repay the education loan, you need to manage your finances appropriately. Classify your expenses based on daily, fixed and other expenses and check how much you can save by working on them. Create a budget of your monthly expenses, and keep a track of your income. It will also bring financial discipline in your life.
  1. Prepayment option: One of the most important education loan tips is to reconsider the prepayment option. Many tend to prepay the loan to save up on the amount of interest. However, it is not always a good idea. To get over with the loan, you should avoid opting for a high EMI amount by reducing the tenure. It may not be possible for you to meet the amount of EMI in the future, which could lead to default in the payments. Hence, choose EMIs that can be managed easily by you and keep the EMI to a monthly income ratio of 40-50%.
  1. Invest in insurance: To prevent any loss of income due to critical illness or medical emergency, make the right financial decision and invest in a term plan. It will provide for your medical expenses and cover you financially in times of need. For the best life cover, you can purchase Aegon Life’s iTerm Plus plan, which offers financial aid for illnesses and medical emergencies. 
  1. Make the right financial choices: If you start taking the right financial decisions at the initial years of your child’s education, you can enjoy the benefit of compounding. Aegon Life’s iMaximize plan is a child education plan that can help you secure your child’s future.

Evaluate your financial condition and apply for the loan that fits your needs. You can then build a repayment strategy by keeping your income and expenses in mind. Manage your loan wisely and enjoy a positive credit score for the future.

Advt. no.: IA/Jun 2018/4127

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