Tips for students applying for a study abroad loan
In India, more and more students are going abroad to study. Foreign ministry data shows that by July 2019, more than a million students had completed their education abroad. Aside from factors such as encountering different cultures and better career prospects, the availability of loans has also helped students realize their dream of studying abroad. For those considering studying abroad, here are some things to keep in mind when applying for loans:
Available lenders: Different financial institutions have different lending terms. Before choosing the loan provider, check whether you need a security for the amount or not, what the interest rate is and whether it is fixed or variable. Other considerations to consider include whether a co-signer is required, processing time, the currency of the loan, the cost of the loan, and any associated fees and charges.
Collateral vs. loans without collateral: Collateral loans are secured by an asset that is offered as collateral in the event that the borrower fails to repay. On the other hand, unsecured loans are sanctioned based on the creditworthiness of the borrower and may require a co-signer. Students applying for a loan on an undergraduate program may not have creditworthiness. Hence, they need a co-signer who has a decent credit rating. It is not required that the co-signer be related to the student.
Fixed or floating ROI: Fixed rates are not affected by market conditions, while floating rates are. In the latter case, this has an impact on the EMI. A fixed rate offers more security against market fluctuations.
Online vs. Personal Lenders: Credit processing is faster with online services. However, a personalized service can provide the ability to negotiate interest rates.
Borrowing currency: Taking out loans in the host country’s currency removes the stress of changing the exchange rate. Also, you can easily repay the loan if you want to stay in the same country after completing your studies. However, compare the interest rates and make sure that the borrowing covers all fees or just the entire institution fee.
Also, check whether there are any other fees or charges in addition to interest. Make sure there are no hidden charges before signing the papers.
The author is a co-founder of Leap Finance