Credila Education Loan
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Education Loan provides you flexible repayment options. However, if you still default, your credit score gets affected, which is likely to create a problem when you apply for a loan in future.

 It is advisable to keep a buffer of at least three months before your EMIs begin. This way you will have some time in hand if you fail to get a job immediately or if there is any break in job. Here are a few options to consider if you are unable to pay off your debt. 

Paying Extra on Your Education Loan

You can make extra payments on your loan at any time, and also designate how the extra amount is applied.

Make payments while in studying or in moratorium (when payments aren't due)

Pay more than the minimum due each month so the additional money gets deducted from your principal balance. Make payments while your loan payments are postponed because of a deferment or forbearance

  • Credila  would apply additional payments to outstanding dues  (if applicable) or any interest that has accrued to date before applying the additional payment amounts to the borrower’s principal balance.
Partial Payments

If you fail to make your minimum payment, there may be delay charges  and penalties assigned to you.

How do you allocate my payment across my loans?

We automatically allocate your payments across your loans; your payment will go first to any delinquent loans in the loan group (loans with the oldest delinquency will be paid first). Once all loans are current or at the same delinquency level, your payment will be prorated to each loan in the loan group according to its monthly payment amount. After the Current Monthly Payment Amount Due and Past Due Payment Amounts (if applicable) are satisfied, or if no payment is due (for example, if your loans aren’t yet in repayment), your payment will be allocated among the loans in the loan group, prorated based on each loan’s outstanding balance. If you do not pay the total amount due on the statement, every loan in the loan group may become delinquent, may be reported to the consumer reporting agencies, and may be subject to at least a minimum late fee. If your payment is received without a remittance slip, and the payment matches the payment amount on your statement, it will be allocated as described above. If, however, your payment does not exactly match the payment amount on your statement, it will be allocated across all loans, including loans in different loan groups that have the same payment address as the address to which you mailed your payment. Once we allocate a payment to a specific loan or loans, payments are applied based on the terms of each loan’s promissory note, usually first to fees, then to outstanding interest, and then to principal.

What happens if I pay more than my Current Monthly Payment Amount Due and Past Due Payment Amounts (if applicable)?

In such a scenario, the extra funds will be applied to your balance. Unless you make your payments through auto debit, extra payments will reduce the amount of any future payments. For example, if you pay an extra Rs.50 and your regular monthly payment amount is Rs. 100, your next payment due will be Rs. 50. If the extra funds are more than the next monthly payment(s), your billing statement(s) will show zero due. Even if you have a zero amount due on your billing statement, continuing to make payments will reduce your total cost of borrowing.

Responsibilities as Borrower & Implications of Default

It is the responsibility of the borrower to understand that availing a loan is a legal obligation. If the borrower fails to meet the terms of the loan agreement, then the lender has the right to take legal action against the borrower to recover the balance of the debt. When the borrower has not paid monthly loan repayment for more than six months, the borrower is in default. It’s always best for a borrower to avoid default because negative records will stay on their credit bureau reports.

Following are some of the consequence of defaulted loans:

  • Being reported to a credit bureau
  • Paying incidental charges for recovery of the  loan in the addition  to the outstanding loan
  • Face legal consequences
  • Impacts future borrowing
  • If the -cheque/ ECS bounces, it is a criminal offence in India. Therefore under the Negotiable Instruments Act, 1881/ The Payment and Settlement Act 2007, the person who had issued the bounced cheque/ ECS is punishable with imprisonment for a term which may extend to two years, or with a fine which may extend to twice the amount of the cheque, or with both. The lender shall also file an additional civil suit for recovery. However the borrower can probably prevent these consequences by being proactive and taking the steps given below.
  • Throughout the tenure of the loan, it's important to regularised your loan repayment and to be in contact with your loan lender, if you have any questions about anything related to your loan.
  • Don't default in your payments -avoid a bad credit record.
  • Do not ignore any communication from the lender.

It is therefore very critical for borrowers to make sure all repayment obligations are met in a timely manner. It is advisable to keep a close check on your payment schedules, in order to avoid a negative impact on your –credit bureau score. An -education loan is usually the first loan availed by -a student -and therefore -is a great opportunity to build a -good -credit history -and credit bureau score. Positive and timely repayments can help students build excellent credit history, which can in turn help them get other loans at better rates in the future.

More than 50% students who pursue higher education go for education loans today. Education loans make sure that lack of finances does not hamper the growth of meritorious students. But another fact in connection with education loans is that your parents are there to guide you for taking the right loan, but in most cases repayment is your own head ache. No wonder, many youngsters are not doing justice to their loans and finances with a careful planning of finances and repayment. And the result, borrower often gets into a deeper trouble which he may not be realizing, owing to a poor CIBIL score for defaulting. 

If you have taken an education loan for yourself or for any of your children, make sure that the loan is repaid out on time to avoid any such complications.  While defaulting on the loan has its perils, repaying the loan on time has its own set of advantages. 

Know your Waiver Period:

If you have taken an education loan it is important to know the loan waiver period. The period from the time of completion of the course till the time the banks start expecting repayment of the loan is known as moratorium or waiver period.

The waiver period varies from bank to bank and you are better off checking with your bank about the waiver period before planning your education loan repayment. While a bank offering waiver period is a good idea, remember, banks are expected to earn of each loan they offer and they start charging the interest on education loans immediately and not wait till the waiver period ends.

Many people who are in a position to repay their education loan often wait for the waiver period before starting out on their repayment. Since banks are charging interest, it is not a good idea to wait for the waiver period to end. Make sure that you start your education loan repayment as soon as possible even if that means starting repayment before the completion of the official waiver period.

Don’t Wait for the Right High Paying Job:

So, now that you have finished your education and have got a job up front, which is not exactly your dream job. Many fresh job seekers who have recently passed out from college and are getting into their jobs commit the cardinal sin of waiting for the right job or a high paying job before repaying the education loan. Remember education loan is accumulating interest and the earlier you repay the loan, the lesser would be the interest you end up paying on the loan. 

Understanding Education Loans and Tax Benefits:

Education loans not only helps taking care of your educational expenses they also come with an additional tax benefit. Education loan offers a tax deduction on the interest paid in the financial year under Section 80 E of the Income Tax Act 1961. So make use of it to save tax in the initial years of your career. 

Defaulting on an Education Loan can be Disastrous for your CIBIL Score:

Borrowing is easy but repayment requires constant financial planning. Many education loans end up as defaults since loan borrowers do not pay significant importance to the repayment. Any defaults on education loan repayment can directly impact your CIBIL score. Of course, as life moves on you will have to take other loans like a car loan, home loans etc.  But a low CIBIL score makes you virtually have absolutely lesser chance. It is therefore essential to make sure you never let your education loan to go down the NPA route even if it means controlling your other financial investments for the time.

Thinking of Prepayment of Your Education Loan? Read this first:

Some banks charge a prepayment penalty for prepaying of education loans while others offer no such charges. Since education loans keep on accumulating interest, it may be a good idea to consider prepayment for the loan and get a clean slate as soon as possible. However before you think of prepaying your education loan make sure to calculate the trade off between paying interest on education loans vis-a- vis the tax benefits offered under Section 80E. In case you find prepayment of the loan is not a good idea for now, you can try to accelerate your education loan repayments by adding some amounts to the EMI each month.

Credila Financial Services is a Subsidiary of Housing Development Finance Corporation Limited (HDFC) . Housing Development Finance Corporation Limited is one of the leading financial services companies of India.
Credila Financial Services Private Limited Registered Office: B 301, Citi Point, Andheri-Kurla Road, Andheri (East), Mumbai-400 059, India