Various myths and misinformation surround the concept and process of an education loan. It is often perceived that an individual must take up a job after finishing any degree or course funded by an education loan. However, by choosing a suitable loan provider, one can avail a loan with flexible terms and conditions in line with their needs and situation, a person can be an entrepreneur and take care of the education loan obligations easily.

It isn’t easy to start and manage a business, irrespective of its nature and size. And an entrepreneur with an education loan is responsible for more than just ensuring the success of their business. With education loan liabilities, an entrepreneur must create strategies to generate enough cash flow to repay debts.

Against this backdrop, here are some of the tips that a young entrepreneur having an education loan debt can take into consideration:

• Talk to your loan provider and create an optimal plan

Before starting the entrepreneurship journey, taking care of the personal finances, expected cash inflows, and expenses is essential. Therefore, create a comprehensive debt plan. If an individual does not have the financial skills to make such a plan, it is advised to take assistance from a wide range of service providers who can provide a realistic debt plan.

Based on the said plan, approach your loan provider to restructure loan/interest repayment schedule as needed. The individual must ensure that they take proactive steps to prevent any default on the loan taken. Any delay or defaults can affect the credit score of the individual negatively which in turn could have far reaching consequences.

• Live Frugally

A business is constantly subjected to fluctuations and volatility in revenues, cash flow, and profits. An individual must control personal expenses by making a priority list of essential and non-essential expenditures. It is highly advisable to take care of the necessary expenses (which include debt repayment) by making a strict budget and adhering to it. This can consist of cutting out on expenses such as eating out, going out to clubbing and partying, and other extraneous expenses. Such saved money could be reinvested in the business or used to repay the education loan. Even though this advice sounds pretty basic, it is critical in attaining the goal of being an entrepreneur while repaying loans.

• Using technology and third-party assistance

If an individual is unsure about the debt plan or repayment capabilities, it is critical to use technology and third-party assistance. The latest AI and ML tools help evaluate an individual’s financial history and the areas of strengths and weaknesses. Such tools ensure that they provide a relatively accurate answer about the repayment capabilities of an individual. This includes aspects such as overspending and unnecessary expenditures. Such a predictive analysis can be critical for an individual to chalk out a financial plan for the business. In addition, a clear roadmap about the future of the company and the extra efforts that might be needed in making the business work shall be more transparent before the potential entrepreneur begins their startup endeavour.

• Concentrating on repayment of education loans through lump sum payments

Instead of paying the EMIs (Easy Monthly Instalments) that include a portion of principal and interest amount, an entrepreneur should try to organise repayments to complete loan obligations before the predetermined schedule. In the current scenario, several new-age education loan facilities provide a flexible option to the students based on low foreclosure charges or even full-waivers in some cases. In addition, the students get the chance to repay loans when they have a large inflow of money. Since businesses often have uneven monthly and weekly inflows, such an arrangement would be perfect for young professionals who want to get rid of their debt obligations as soon as possible.

• Seeking business financing

Entrepreneurs can seek business financing alternatives if they believe in the business’s idea and potential. Different options range from bank loans, venture, and angel investors, divesting equity, and arranging finance from friends and families. Since a considerable part of the potential earnings might be spent on loan debt repayment, such options are critical in ensuring that the business is not short of finances.

Summing up

Pursuing higher education by taking student loans is common, and many individuals have benefitted from this facility. The scenario and circumstances surrounding these loans have entirely changed with the induction of new-age education loan options. Rather than being a burden on the student characterised by high compounding interest and debt obligations, the situation has become friendly and supportive for the borrowers. From flexible disbursal arrangements to comprehensive technical assistance to the students for their repayment plans, these fintech loan platforms ensure that higher education and entrepreneurship dreams can be achieved easily and simultaneously.