Abroad education journeys are packed with steps of equal importance. Acing GRE, GMAT, IELTS, TOEFL exams, exploring and shortlisting the universities, securing funds, visa applications are some of those steps required to fulfill the dream of an abroad education. Out of this, students are most baffled by education loans. Nowadays, banks have simplified the education loan process for students, so that students can avail themselves of the schemes with maximum benefits. High quantum loans with a low rate of interest, flexible repayment policies, longer loan tenure, quick approval, easy disbursement, are available to students. With a little guidance, you can also pick the right loan type and lender to fund your education. So, let’s take a look at some important points to keep in mind while selecting a loan -
There is no dearth of lenders in the market offering education loans to students. While this has made it easier for students to get a loan, selecting the right type of lender is also necessary. The main categories of lenders are - public sector banks, private banks, private lenders such as Non-Banking Financial Companies (NBFCs), and international lenders. Each lender has their pros and cons, which should be studied thoroughly before finalizing. Public sector banks offer unsecured loans only up to INR 7.5 lakhs. For a loan amount above this, collateral or security has to be pledged. Private banks and NBFCs take calculated risks and offer up to INR 40 lakhs in unsecured education loans with a co-applicant. International lenders offer loans in the foreign currency required with no collateral or co-signer. Loans taken in any currency other than INR comes with the added risk of foreign exchange fluctuations.
There are two types of loans - Secured education loan and unsecured education loan. Secured education loans require students to pledge collateral or security. The property pledged backs up the loan amount borrowed, thus reducing the risk that is borne by the lender. As a result, the quantum of finances available tends to be high with low-interest rates. Collateral can be immovable property, liquid assets, or third-party property. On the other hand, with unsecured loans, students can borrow from INR 10 lakhs to INR 40 lakhs with a rate of interest starting at 11.25%. Case exceptions are always there, so the limit can be increased in some cases. The eligibility for an unsecured loan is a co-applicant with sufficient income and a good CIBIL score. Most lenders require students to make simple interest payments during the study period.
Calculate the Loan Amount That You’d Need to Cover All Your Expenses
High volume education loans are available to students to cover the cost incurred. You can borrow up to INR 1.5 crore for your abroad education from certain lenders with collateral, depending on the type of course and country. Calculate your expenses such as tuition fees, living expenses, accommodation, equipment purchase, flight tickets, etc. to get the amount you’d need for your education. Most lenders cover 100% of the expenses incurred.
The rate of interest is one of the crucial elements of a loan that determines the extent of your financial burden. Public sector banks offer the lowest rate of interest starting from 7.6% for men and 8.1% for women. Whereas, private banks and lenders tend to charge a little higher, starting from 11.25%. The nature of the rate of interest should also be taken into account - Fixed or Floating interest rate. Most lenders offer an interest rate that fluctuates during the loan tenure. That is, it can increase or decrease with respect to the market conditions. This increase in interest rates is more in the case of NBFCs, while it is negligible in the case of banks.
The eligibility for a loan is not fixed. The co-applicant should be an Indian citizen with a bank account in India. However, the type of loan taken - secured loan or an unsecured loan - would require you to check your loan eligibility. In the case of a secured education loan, the market value of the collateral pledged should be more than the requirement. In the case of an unsecured education loan, the income of the co-applicant should be sufficient to make interest payments. Students can simply check their loan eligibility on GyanDhan’s Loan eligibility tool.
After deciding on the type of loan, lender, and amount, apply for the loan online. The process includes filling out an application form and submitting all the required documents.
Other Important Elements of the Abroad Education Loan
Processing fees, loan tenure, repayment, moratorium period, are equally important elements that should be checked before finalizing the loan.
- Processing fees - It is the charge you pay to the lender to process your loan application. It can be anywhere from 0% to 5%. - Moratorium period - It is the period where the borrower is not required to make any repayments. It usually consists of the study period, plus 6 or 12 months after the course ends. The loan repayment will start after the grace period ends. Students should note that interest is charged even during this period. - Loan tenure - For ease in repayment, lenders offer 10 to 20 years as the loan tenure. However, it is advisable to first calculate the total interest you will be paying during the tenure and the difference in EMIs before you settle with a loan tenure.
These are all the key points that a student should know before applying for an overseas education loan. Students can further make this process hassle-free by approaching GyanDhan. It is an education-focused financing platform that has helped thousands of students secure funds from the right lender. To make the process smooth, it has partnered with several lenders. Students are assigned a personal Education loan counselor that guides them throughout the process. Not only this, but they also offer services such as online loan process, customized document checklist, doorstep document pick-up service, and many more absolutely free of cost.