How Can I Refinance My Student Loans in India?

In case you have an educational loan with high interest rates or you find that your present terms of repayment don't match your finances, student loan refinancing could be something to consider. In India, the procedure is usually conducted via education loan balance transfer or loan takeover, wherein a new financier takes up the old loan and gives you repayment on new terms.

Before considering refinancing, check out the interest rate, fees, tenure, and interest for the total duration of the loan.

Quick Look

1. For refinancing an educational loan in India:

   
   

   1. 1. Assess your current loan’s balance and rate of interest.

   2. 2. Verify your CIBIL score and repayment record.

   3. 3. Consider various offers from banks and NBFCs for loan takeover.

   4. 4. Assess the overall cost of the new loan.

   5. 5. Submit income proof, identity proof, and other loan-related documents.

   6. 6. On approval, the new financier settles your old loan.

   
   

What Can Make It Worthwhile to Refinance?

If your rate becomes lower than your current rate, then you might save money in terms of interest payments. However, there is no guarantee that refinancing is always going to be worthwhile because an increased tenure can mean that you have low EMIs but also high interest payments.

There are processing charges that you have to pay at the time of refinancing. For example, SBI loans currently include education-loan takeover options, for amounts above ₹10 lakhs with security. The interest rates on such education loans by SBI are benchmarked and therefore variable.

Our team at Primescore suggests that before you use any online loans, a loans app, instant loans or other quick-credit products to manage education debt, compare their actual annual cost carefully; replacing one long-term loan with expensive short-term borrowing can make the situation worse.

Does CIBIL Matter?

Yes, your CIBIL report might play an important part during the assessment of your application for refinancing by a new financial institution. Regular EMI payments and good credit management might add value to your overall credit score.

It is for this reason that it is not advisable for borrowers to consider refinancing as just getting an instant personal loan to settle the original education loan. The personal loan has its interest rate and eligibility requirements.

Products like instant loans, short term loans, Bajaj loans or empower loans cannot be considered as alternatives to refinancing the education loan.

The current SBI Education Loan details, for instance, include takeover facilities for some eligible education loans.

PrimeScore can help borrowers monitor their credit profile and understand their credit position before making another significant borrowing application.

What Should You Compare?

Before accepting a refinancing offer, analyze:

• 1. Interest rate

• 2. Principal remaining

• 3. New EMI

• 4. Tenure remaining

• 5. Interest to be paid

• 6. Charges applicable for processing and others

• 7. Requirement of collateral

• 8. Conditions for prepayment

Low EMI does not necessarily mean a cheaper deal. The total repayment cost is the number that really matters.

FAQs

1. What does student loan refinancing mean in India?
It generally means transferring an existing education loan to another lender through a balance transfer or loan takeover.

2. Can I refinance an education loan with SBI?
SBI currently offers takeover options for certain eligible education loans, subject to its applicable conditions. 

3. Does CIBIL affect education-loan refinancing?
Your credit history and repayment behaviour may form part of a lender's assessment when considering a new loan.

4. Is refinancing always cheaper?
No. A lower interest rate can help, but fees, tenure and the total remaining interest must also be considered.

5. Can an instant personal loan be used to repay an education loan?
It may be technically possible depending on the lender and product, but it should not be assumed to be financially better than an education-loan balance transfer.