Furthering one’s studies is one of the best investments anyone can make, but some of us need financial assistance in order to make such an important investment.
When it comes to financing our tertiary education or those of our children, some of us have to rely on loans or scholarships from government agencies, financial institutions, educational institutions and the private corporations. However, the number of scholarships given to the students are limited and it is reserved for exceptional students. The only other option is to apply for a study loan.
Finding the right loan
Since an education loan is a form of financial aid that must be repaid – often with interest – you have to make sure to only borrow the amount you need. But first, you have to do some groundwork to find the type of loan that will suit your needs. You have to know what kind of information you are looking for. This helps narrow down the options available and saves you time in finding the right one. Below are some basic information you need to know.
1) Repayment Schedule
Recognize the level of difficulty of finding a job. You should be wary if the loan requires that you start paying six months after you finish your studies. While six months is enough time to look for a job, it does not guarantee that you will secure one within that period. To be on the safe side, find a loan structure which allows you to start paying only after you have secured a job.
2) Loan Coverage
This is perhaps the most important information especially if you have to also rely on a loan to cover your living expenses. Loans offered by Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN), for instance, cover both course fees and living expenses.
- Level of Education – Since there are several levers of educational courses and programmes, namely certificate, diploma, degree and postgraduate levels, it is prudent to check which institutions offer the type of loan you require.
- Margin of Financing – Find out how much the course fees are as this will make it easier for you to calculate how much loan you will need; you must also factor in your living expenses in the calculations. Thus, if you need about RM65,000 for the final semester, then that is the amount of loan you should apply for. But if your parents can afford to pay half of the expenses, then you should only apply for half of the loan. Alternatively, you can also work part-time and apply for a loan that covers course fees and part of your living expenses. Above all, keep in mind the monthly payments which you have to pay before deciding on the amount of loan you wish to apply.
- Interest Rate – When it comes to loans, it is wise to choose one with the lowest interest rate and possibly with “daily rest” where the loan interest is calculated on a daily basis. As a result, the principal sum will be reduced every time loan payment is made, thus reducing the total outstanding balance significantly.
- Amount and Period of Repayment of Loan – You are lucky if you manage to secure a loan from government bodies such as the Ministry of Education or State Foundation because it is usually interest free. If so, you will only have to pay the amount borrowed. But if the loan is obtained from financial institutions, then you will have to pay the interest as well as the principal, which increases the amount of loan.
3) Paying the Debts
After you graduate, try not to apply for a credit card in the early stages as the temptation to use it to splurge on your spending is great and often irresistible for young graduates. The fact that credit cards charge higher interest rate – 18% per annum – does not help either. So try to avoid financial disaster by making sure that credit cards are not options to spend more. With the balance after paying off the loans every month, you need to start building a sound financial strategy which can be used to create an emergency fund, buy insurance and invest in a secure high-return investment programme.
Should you accumulate other debts and find it difficult to pay the study loan, make sure you contact the lender to inform them of the situation. Banks welcome such efforts and often suggest an alternative repayment scheme. Do not wait until the summons are at your doorstep to take action.
Simple actions such as these can save you the embarrassment of having your name published in newspapers or being hounded by the bank. It is also wise to maintain a good credit record. By setting the loan, you will take the shortest route to gain financial independence, and more importantly, allow others the opportunity to further their studies as well.
