Securing an education loan is often a crucial step for students pursuing higher education opportunities abroad. However, with the disbursement comes other responsibilities that every borrower needs to keep in mind to avoid any defaults in the future. Some of the essential elements of study abroad loans are moratorium and grace periods.
These periods play a significant role in shaping the borrower’s repayment journey, offering flexibility and relief during transitional phases. In this article, we delve into the impact of grace and moratorium periods on education loan repayment for students studying abroad, providing valuable insights to help borrowers effectively manage their loan debt.
Let us start by knowing in detail about both of these periods!
What is a Moratorium Period?
A grace period is a specified duration granted by lenders during which borrowers are not required to make monthly payments on their education loans. This is typically the study period in which duration depends on the type of degree you opt for. However, the exact duration may differ according to your chosen financial lender. This period allows study abroad aspirants to focus on their studies stress-free without worrying about repayments.
Borrowers should be aware that during the moratorium period, they are not exempted from paying the simple interest on their principal loan amount be it a collateral or collateral free education loan. However, it may be optional to pay simple interest in some financial institutions such as nationalized banks but is mandatory to pay full or partial simple interest for private banks or NBFCs.
Now, after knowing about the moratorium period comprehensively, let us move further in the article to learn about the positive impact of this period on your study abroad journey.
Benefits of Moratorium Period in Study Abroad Loans
Here are some key benefits of the moratorium period:
- Education Focus: Students do not have to pay installments to their loans through the moratorium period so they can concentrate on their studies completely and not get worried about handling loan repayments during their study time. They are provided with this opportunity to reach a specific excellence level as they fully engage in academic studies, research undertakings, as well as co-curricular and sports activities which in turn enhance their overall learning process.
- Career Readiness: The moratorium period provides a chance for students to think of their careers by going for internships, networking with employers or focusing on any other aspects of their careers.
- Financial Adaptability: During the moratorium duration, students obtain the privilege to re-direct their finances in important areas that may include housing, college supplies, day-by-day spending, and travel expenses.
- Transitional Phase: Getting through a course study and starting a job after graduating from a university can be an important phase in a young person’s life. The moratorium period is a transition period through which a graduate may maneuver from the life of an undergraduate into the real world and the responsibilities of a career which he will embrace before the school loan repayments start.
How Does the Grace Period Differs from the Moratorium Period?
Unlike moratorium periods, which are typically offered automatically to all borrowers, grace periods are granted on a case-by-case basis and may require documentation to substantiate the borrower’s eligibility. Common reasons for moratorium include enrollment in further education, unemployment, economic hardship, or military service.
Key Considerations for Borrowers in Moratorium and Grace Period
After getting an education loan to study abroad, to make the most of grace and moratorium periods, borrowers should stay informed about their loan terms, including the duration and conditions of these periods. Planning for loan repayment during and after these periods is crucial, as it allows borrowers to develop a comprehensive financial strategy and avoid potential pitfalls such as loan default or delinquency.
In conclusion, grace and moratorium periods are essential components of education loan repayment, offering borrowers valuable flexibility and relief during transitional phases of their academic and professional journey. By understanding the distinct features and implications of these periods, students studying abroad can effectively manage their loan debt and achieve their academic and career goals. However, if you are still unclear about these terms or require clarity on other aspects of study abroad loans, you can contact an overseas education loan advisor for assistance. From helping you choose the right financial lender to get you the lowest interest rates for education loan abroad, these advisors will ensure you fulfil your educational dream!
