Pursuing higher education abroad can be expensive. Thus, students facing financial challenges may find educational loans to be a viable solution. However, it is crucial to be aware of common issues and take appropriate precautions so that they do not end up falling into a debt trap. Protecting those aspiring to study overseas from financial strain is of utmost importance.
Below are several key considerations that students should keep in mind to prevent an increase in their financial obligations.
- It is important to distinguish between essential and non-essential items and borrow the required amount. This will help you avoid unnecessary debt.
- Neglecting grants, scholarships, and other financial aid options may result in missing out on great opportunities to reduce expenses.
- Properly understand the terms and conditions of the borrowed loans. The repayment plans and other details must be crystal clear.
- Choosing a high-cost institute or accommodation could burn a hole in your pockets.
- Postponing or deferring the payments may give you instant results, however, this will only lead to increasing the total loan amount.
- Avoiding these pitfalls could result in efficient management of educational loans.
Also Read: Who bears the burden of a loan after the borrower’s death?
How to Avoid Falling into a Debt Trap?
Overcoming a financial burden can be daunting. Nevertheless, with careful and strategic planning, it is achievable. Several factors can be considered to simplify the process and prevent falling into debt traps. These include:
- Create an emergency fund, allocate a certain amount of money, and set a separate budget. This will help you keep things running until the situation stabilizes.
- Plan the repayment. This will help you focus on paying back high-interest debts first, followed by other debts.
- Avoid impulsive spending. There could be several reasons behind this kind of shopping, including insecurities from peers, instant gratification, and more.
- Developing and preparing a budget will help you track your expenses and handle the situation as and when needed.
- Consolidation of debt is a financial tactic wherein multiple loans are merged into a single loan. It will help you settle everything at once.
Mamta Shekhawat, Founder of Gradding.com, a study abroad platform, says, “Walking into a debt trap is easy,
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