By Monica Acirocan
Taking out a loan to pay for your child’s tuition is a significant financial decision. While it can help with education costs, it can also have a negative impact on your credit score, debt-to-income ratio, and overall financial health. Unfortunately, many parents make mistakes when taking out loans for their children’s education, so, I will share some of the most common ones and offer advice on how to avoid them.
Not exploring all options
The first mistake that parents make is not exploring all options. Parents should research and consider all available financial aid options, such as scholarships, grants, and student loans, before taking out a loan. It is critical to consider all options to avoid taking out an unnecessarily large or high-interest loan.
Not having a repayment plan
Another mistake that parents make is not having a repayment plan. Before you take out a loan, you should know how you intend to repay it. Missed payments, late fees, and credit score damage can result from not having a repayment plan. Include loan repayment in your monthly budget and consider setting up automatic payments to ensure timely payments.
Not understanding the terms and conditions
Many parents are unaware of the loan’s terms and conditions. Before signing any documents, it is essential to read and understand all of the loan’s terms and conditions. This includes the interest rate, repayment terms, fees, and any penalties for late or missed payments.
Borrowing more than is required
Parents may borrow more than is necessary to cover their child’s school fees. This can result in unnecessary debt and higher interest payments. To avoid making this mistake, parents should calculate the exact amount of school fees and borrow only that amount.
Not shopping around for the best loan
Finally, parents may not shop around for the best loan. It is vital to compare loan options and find the best loan for your financial situation. Look for loans with lower interest rates, lower fees, and more flexible repayment terms. When you consider these, you will find that Ecobank has the most suitable Edusave loan for parents to take advantage of.
With the Ecobank Personal Loan, Ecobank customers can get more than just a loan; they can also start an Edusave policy for their children’s future, with access to up to USD 75,000 (UGX 280 million), a 50% discount on arrangement fees, 1% paid to an Edusave policy, up to 60 months loan tenor, automatic qualification for a salary advance of up to 50% net pay for up to 30 days, and same-day loan processing for new loans and buy-offs.
In conclusion, taking out a loan to pay for your child’s school fees can be a wise investment in their future, but it is critical to avoid common mistakes that can lead to unnecessary debt. Do your homework, borrow only what you need, read the fine print, look into other funding options, and plan for the future. With careful thought and planning, you can make the best financial decision for your family.
About Author:
Monica Acirocan is the Head of Credit at Ecobank Uganda.