How educational credits work

Educational Credit

Educational loans are very useful when we cannot spend heavily on our children’s education, either because our finances are not in optimal conditions at that time, or because we do not have enough liquidity.

This type of credit is a service for students, which allows them to timely cover part or all of the cost of their university tuition, and the balance is paid after the student finishes his degree.

Educational institutions are usually in charge of being intermediaries with banks, which are the ones that grant this kind of credit.

Also read: What is a credit? We tell you some characteristics that perhaps you did not know

The characteristics of educational loans vary according to the financial institution that grants them. However, they usually have a lower interest rate than other types of credit, and usually, only interest is paid month by month, giving a grace period to start paying the amount borrowed.

If you want to take an educational credit, you must take into account the following:

  • Commissions:  All the payments that you must make associated with the credit (opening, penalties, etc.).
  • Interest rate:  It is the cost of the credit, it is expressed as a percentage and is established since the credit is granted. In educational credits, it is common for this rate to remain fixed during the term of the credit.
  • Total Annual Cost (CAT):  It is an indicator that summarizes in a single number most of the expenses to be paid in credit. The higher the CAT of credit, the more expensive it will cost you.

Also read: Debit and credit cards what is the difference?

Is the loan a scholarship?

Scholarships and loans are two very different things. There are so-called non-refundable scholarships, in which the student does not have to contribute any amount, that is, they study for free, in exchange for meeting requirements such as maintaining an average of excellence and getting involved in the school activities of their university.

The next type is scholarship financing, which means that part of the studies will be free, and another part will be financed. For example, someone may have a scholarship that covers thirty-five percent of their studies, and financing that covers fifteen percent, which means that the remaining fifty percent is paid in the normal way. In other cases, it may be fifty percent scholarship and fifty percent financing. These percentages are defined directly with the educational institution, depending on what type of payment and credit policies apply, taking into account the student’s academic history.

On the other hand, a financed career, or educational financing, refers to the fact that the student develops his preparation supported by a loan that he will pay after finishing his professional career. This loan can be made by the school or through a banking institution.

All three are good options and you should choose the one that works best according to your economic capacity. In addition, it will be important for you to analyze the advantages and disadvantages of requesting an educational loan. Check the terms and conditions of it carefully.

Approach the universities to request information, each one has different plans and alternatives.

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