The value of a dream to become a physician is incalculable. However, the cost of obtaining an MBBS outside of India may be a tangible amount. For many individuals in India and their families, educational loans enable students to pursue an international medical degree, thereby making their ambition a reality. After graduating from an internationally accredited medical school, students must begin repaying the loan used to finance their degree. Understanding the repayment process is not only about money management; it is also about planning so that educational debt does not interfere with the successful progression of a career to which you will have invested significant time and effort.
To effectively strategize on how to repay an educational loan taken out to attend an international medical school, it is essential first to understand how much is owed. Although most students and parents realize that they will have to repay a loan to attend an international medical school, most do not take the time to understand the terms of the loan that will apply to the repayment of the loan for the next ten or more years after graduation from an internationally accredited medical school. Understanding the terms of the loan and how it will affect the repayment will be the foundation of a successful repayment strategy for MBBS education loans.
- Know Your Numbers
First and foremost, gather all relevant information on each of your student loans. An increasing number of graduates are taking out multiple student loans from multiple lenders, whether those be banks, personal loans from family and friends, or credit lines from several financial institutions. Each loan should be documented in one document (example: Excel spreadsheet) to show its present remaining balance, interest rate, loan repayment period, monthly payment amount due (if required), and the lender’s requirements for that loan (if any).
Next, total debt load—how much you currently owe on all your loans combined—should also be calculated. By understanding how much you owe, it will be much easier to develop a plan for repayment of all your loans. Many borrowers do not know the total dollar amount of what they owe; thus, making financial decisions without knowing the total obligations can lead to problems.
The understanding of how interest rates work is especially vital for anyone looking for tips on repaying loans taken for studying MBBS while studying outside of India. For educational loans, most are issued with floating rates of interest, which fluctuate based on economic conditions. Knowing whether the interest rate is static or floating provides insight into what is currently owed on the principal balance and the amount allocated for interest when payment is made monthly. In the early years of repaying an educational loan, more of that monthly payment will go toward interest than to pay down the principal. If a borrower does not know this, then it may cause frustration for the borrower due to the slow reduction of the amount owed on the loan.
- Grace Periods and Moratorium
In most cases, students may have access to a brief period of grace after finishing school, known as the in-school grace or moratorium period. After graduation, the moratorium period is usually considered to be an opportunity for new graduates to transition into the job market and to obtain employment and income in order to begin paying down their education loans. In India, the moratorium periods for education loans are generally between six months and one year after the completion of your education.
Interest accumulates during the moratorium period as well, and therefore, at the end of your moratorium period, you will be required to pay the interest charges on your new principal balance. Although the moratorium period allows you to take time off for your transition to being employed, taking advantage of the extra time to get your finances in order will significantly reduce the total amount of interest charges on your education loans.
Know exactly when your moratorium period ends, and make sure you have a plan for your first payment to prevent missing payments and receiving penalties for late payment, as these will affect your credit report negatively. Make this date easy to remember, and make sure you start planning your repayment plan before you reach this date.
- EMI Structure and Repayment Timeline
An Education Loan is usually set up as EMIs (Equated Monthly Instalments), where you pay both the principal and the interest every month. Before applying for an Education Loan, you should calculate the monthly amount of EMIs payable and what percentage of the expected salary would constitute the monthly amount of EMIs. Financial Experts/Advisers will generally recommend that no more than 30-40% of your take-home income should go to debt payments to remain financially secure.
Most lenders will typically offer education loans with repayment terms that range from 10 to 15 years. Depending on the loan amount and policy of the lender, as well as the negotiated terms. By taking advantage of longer repayment terms, your monthly payments will decrease, but the total interest paid over the life of the loan becomes noticeably larger. Conversely, taking advantage of shorter repayment terms means that your payment burden increases, but the total amount paid for the loan will be significantly lower.
Strategic Approaches to Loan Repayment
When you know exactly what you’re supposed to do, you can begin to implement strategies for repaying your MBBS (medicine and surgery) overseas Student loan faster while living your life.
- Paying Off Your Highest Interest Loans First
If you have a number of loans, the Avalanche method recommends that you put your excess payments to your highest-interest loans first, while applying only the minimum amount due to your other loans. The mathematical basis for this method is that it reduces your overall interest payments over the term of your loans.
For example, if you have an educational loan with a 10% interest rate and a personal loan with a 14% interest rate, all of your extra money (beyond the minimum payments) should be applied to the personal loan first. After you have eliminated that loan, you can use the entire payment amount for the next-highest interest loan, continuing the “avalanche” of payments toward the higher-interest loan.
This payment strategy requires a great deal of self-discipline because you won’t see your individual loans paid off right away, but it is the most cost-effective long-term solution for repaying your MBBS (medicine and surgery) overseas Student loans.
- Prepayment and Part-Payment Strategies
Making additional payments toward your MBBS foreign education loan is one of the best ways to repay your loan efficiently. By making even small extra payments toward your loan, you will be able to significantly reduce the amount of interest that you would owe and also decrease the length of time that you will be required to make payments toward this loan. Most banks in India allow borrowers to make prepayments toward their education loans without penalties; however, you must check this with your favorite lending institution.
When making any additional payments, be sure to inform the lender how you would like the additional payment to apply (i.e., how it will affect your principal rather than simply prepaying future EMIs).
Regularly, there are several opportunities for making extra payments toward your loan:
- Your annual bonus or incentive
- Gifts or bonus money offered during festivals
- Payment from additional work (locum shifts/consultations)
- Tax refunds (unexpected windfalls)
Using a portion of your monthly salary specifically designated for making additional payments toward your loan.
Even adding a relationship rate of 10-15% to each monthly EMI could dramatically reduce your total interest payments. For example, if you had a loan of ₹20 lakh at 10% interest for a term of 10 years and added just ₹2,000 to the EMI, you could theoretically save lakhs in total interest and be able to pay off your loan several years sooner.
- Loan Refinancing and Balance Transfer
As you advance in your career and improve your financial standing, refinance or transfer your educational loan to a lender that offers improved terms. This is a good way to repay your medical school education loan (MBBS) from another country.
Lenders are attempting to attract borrowers who have a good reputation for repaying loans and have secure sources of income. If you have paid your educational loans consistently for two to three years and have an excellent credit rating, consider contacting other lenders to refinance your loan at a lower interest rate. Over the long term, even a small reduction of 1 to 2 percent in interest rates can provide you with significant savings.
- Increase Your Earnings to Facilitate Faster Loan Payments
While it is necessary to manage your current earnings wisely, the obvious way to repay your medical school education loans more quickly is to generate additional income, which will accelerate your ability to make payments. The good news is that as a physician, you will have many diverse employment opportunities that can supplement your primary job.
A few ways that you can boost your income include:
- Private Practice: You can add hours (e.g., 2-3 hours on the weekends) that can provide income to repay your loans.
- Telemedicine: You can provide consultations to patients via technology from home during your available time.
- Medical Writing/Telemedicine: Many pharmaceutical companies, health websites, and medical publications hire medical professionals to create educational content for their sites.
- Tutoring/Teaching: By tutoring students preparing for medical board exams (e.g., NEET, FMGE), you can utilize your expert knowledge and skills to increase your income.
Budgeting and Expense Management
- Making an Accurate Financial Plan
The first step in creating an accurate financial plan is to record every single penny you make and spend each month to understand your overall spending, including income, and how much you’re saving or spending. Your income should include both your paycheck and any other income sources, such as side gigs, investments, etc. It’s also important to categorize your spending as either necessary (housing, food, transportation, loan payments, insurance) or discretionary (entertainment, eating out, shopping, and traveling). This transparency allows you to see how much money comes into your life, where it goes, and how to lower your costs.
You can take advantage of the 50-30-20 Rule when budgeting: 50% for basic living expenses (like rent, food, transportation, loans, insurance, etc.), 30% for luxuries (like dining, shopping, and traveling), and 20% for saving and paying off any debt over the minimum payment amount. If you are a doctor repaying MBBS (or medical studies in general), you may want to change the proportions of your income by allocating 50%, 20%, and 30%, respectively, to help you generate larger payments toward your student debt.
There are also budgeting apps like Money Manager, Walnut, and ET Money, which will automatically link to your bank accounts, track your expenses, categorize spending, and show you visualizations of how you are using your money. This automation will save you a lot of time spent tracking your spending and budgeting yourself.
Education Orbit Counselling and Link
Educational Orbit Counselling & Link provides complete support with both University selection and admissions, as well as preparing for Financial Assistance, Lifelong Loan Obligations and the complete process of loan repayment.
EOCL India (Education Orbit Counselling and Link) offers comprehensive support to ensure that all aspects of your overall financial picture for MBBS education abroad are included in the process of applying for and obtaining an MBBS degree.
