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If you need money but lack the funds or are falling short, banks can assist you鈥攚hether you want to start a business, purchase a vehicle, or require a personal loan. In exchange for providing this financing, the bank requires a guarantee and sets a fixed monthly interest rate, which serves as the bank's earnings. While obtaining a loan from a bank used to be a difficult process involving numerous formalities and requirements, the procedure has become significantly easier today; an individual can now secure a loan quite conveniently, provided they have some form of collateral or backing upon which the bank can base the loan. There are various types of loans, and you have likely heard of student loans, which are designed to cover the costs of higher education. Often, a student may excel academically and gain admission to a prestigious college, yet their parents may lack the financial means to cover the tuition fees; in such cases, the bank provides a student loan to pay the fees. The interest is initially deducted from the parents' monthly income and continues to be charged until the student secures employment. Once the student gets a job, the deductions shift to their own account, and a monthly installment plan is established for the repayment.
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From one perspective, this loan is a great option for students; it offers financial support and helps them complete their education, enabling them to pursue their preferred courses and eventually land the jobs they desire. However, while it sounds appealing, the reality is quite complex. I call it complex because there are several underlying factors one needs to be aware of. Primarily, approval for this loan hinges on two factors: the student's academic performance鈥攕pecifically their marks, which indicate their scholastic aptitude鈥攁nd their parents' monthly income. The income is assessed because, once the loan is sanctioned, a fixed monthly installment schedule is established, and these payments are deducted directly from the parents' bank account. Now, consider a scenario where the student fails to secure a job or faces other setbacks; is it fair for the parents to bear the burden of repaying the entire loan? Furthermore, what happens if a student is academically brilliant but their parents do not earn enough to cover the monthly installments? Will the loan be denied in such cases? In reality, this situation arises frequently: a student may excel academically, yet the loan application gets rejected simply because the parents cannot afford the monthly payments.
Typically, the procedure involves initially paying fixed installments from the parents' accounts; once the student secures a job, larger installments are deducted from their own account, adjusted according to their salary. The crucial question arises when a student fails to land a job鈥攑erhaps they wish to pursue further studies or face other unforeseen circumstances鈥攔aising the issue of whether the interest should be waived in such cases. However, this presents a dilemma: if the loan is waived, the cost must still be borne by someone, as banks do not simply write off their funds and must account for every penny. Ultimately, the burden falls on taxpayers鈥攚hether through increased inflation or other means鈥攂ecause the money must be repaid. Is this, then, the right approach?
This is a rather complicated issue because both parties have valid points from their respective perspectives. In such a situation, adopting a middle ground鈥攕o that neither party faces undue hardship鈥攚ould be ideal. While some inconvenience is inevitable, the entire burden should not fall on just one person. For instance, if an individual fails to secure a job, the bank could offer a temporary moratorium on payments; this would allow them a specific timeframe to apply for new employment without the constant stress of the loan hanging over their heads. Many people suffer immense anxiety due to loans, which hinders their ability to focus on preparing for a career. If banks were to allow a temporary hold on installments, it would provide significant relief, easing the financial pressure and enabling the individual to concentrate on finding a better job.
Often, when people need money but cannot find a job, they accept whatever employment is available鈥攅ven if the pay is low鈥攕imply to secure an income; this is a major mistake. Waiving loans is unfair to taxpayers because if banks were to constantly forgive individual loans, the government would be forced to raise taxes to cover the shortfall鈥攕ince the loan amount ultimately needs to be repaid by someone. Raising taxes would effectively mean taking money out of the pockets of the general public, which is entirely wrong. Therefore, a better alternative for banks in such situations is to offer a temporary moratorium or a hold period on installments, giving borrowers more time to find a decent job and repay their loans.
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