Top mistakes Indians make when applying for education loans

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For many Indian families, education loans are the bridge to a child’s dream university — whether in India or abroad. But in the rush to secure funds, people often overlook key details that can later cause financial stress. Here are the most common mistakes borrowers make when applying for an education loan and how to avoid them.

Not comparing lenders

A lot of applicants go straight to the bank they already have an account with, without checking what other lenders are offering. Interest rates, processing fees, and repayment terms vary widely. Even a 0.5 percent difference in interest can translate into thousands of rupees over the life of the loan.

Ignoring co-borrower responsibilities

Education loans usually require a parent or guardian as a co-borrower. Many families don’t fully realize this means the co-borrower is equally responsible for repayment. If the student fails to repay on time, the parent’s credit score takes a hit too. This needs to be discussed openly before signing.

Over-borrowing without planning

Some students take the maximum loan amount offered, without calculating actual needs. Tuition, accommodation, and living costs differ from place to place, so borrowing more than necessary only increases the repayment burden later. It’s smarter to borrow what you need and plan the rest through scholarships, part-time work, or family support.

Missing fine print on moratoriums

Most loans have a moratorium period — a pause on repayment while the student studies and finds a job. But many don’t realize that interest often keeps piling up during this time. By the time repayment begins, the loan amount has ballooned. Clarifying whether interest is simple or compound during the moratorium can save nasty surprises.

Not factoring currency and job market risks

For students studying abroad, there’s an added layer: exchange rates and job prospects. A depreciating rupee can make repayment costlier if the loan is in foreign currency. Similarly, assuming you’ll land a high-paying job abroad immediately after graduation can backfire if the market slows.

The bottom line

Education loans are a lifeline, but only if taken wisely. Doing your homework, reading the fine print, and planning repayment from day one can prevent them from becoming a financial trap.