Getting a Time Extension on Your Educational Loan Due to Unemployment
Many students face financial difficulties after graduating, particularly if they are unable to find employment. With the recent amendments made by the International Bank of Asia (IBA) to its education loan model scheme, there are options available to extend your loan repayment period if you are still unemployed. This article will provide you with steps to follow and the options available to you.
Understanding the New Repayment Model
After completing your course, banks generally provide a one-year grace period before the start of repayments. However, in addition to this grace period, IBA permits banks to extend the repayment period further. Specifically, if you are facing unemployment or under-employment, banks may offer another 18 months of extension, broken down into cycles of 6 months, up to a total of 2 or 3 extensions.
The maximum repayment period can be extended to 180 months. This means your Equated Monthly Installment (EMI) will be reduced. However, not all banks may offer the option for balloon or telescopic repayment, which allows for lower EMIs initially with a gradual increase over time. If your bank does offer this option, it is worth requesting it.
Alternative Strategies to Manage Your Loan
If your bank is not willing to extend your loan period, you can explore other avenues to manage your loan. One strategy is to request for the interest portion of your loan to be paid from alternative sources, such as friends or family members. You can then apply to the bank for rescheduling the loan, allowing for a longer repayment schedule and citing your financial difficulties.
It is crucial to communicate openly with your bank about your situation. Providing evidence of your unemployment or under-employment, such as job applications, interview records, and rejection emails, may help in obtaining a favorable response.
Common Pitfalls
Unfortunately, it is not uncommon for banks to not grant extensions, especially if you have already completed your course and are approaching the one-year grace period. Banks generally provide a 6 to 12-month window to be placed after final year exams. During this time, you should either repay the pending EMIs or risk your loan becoming a non-performing asset (NPA).
What is a Non-Performing Asset (NPA)? An NPA is a borrower who is unable to meet the loan repayment obligations. This can lead to severe consequences, including legal action from the bank, potential wage garnishment, and damage to your credit score. Therefore, it is essential to take proactive steps to manage your loan and your finances.
Conclusion
While getting a time extension on your educational loan due to unemployment can be a challenging process, there are still options available to you. By understanding the new repayment model and exploring alternative strategies, you can better manage your loan and mitigate potential financial distress. It is crucial to remain proactive, communicate openly with your bank, and seek support from friends and family if necessary.