Students pursuing advanced degrees abroad need fin help

In fact, the numbers have grown exponentially in the past two decades. US, Canada, UK, Australia and Germany are some of the most popular destinations finding preference among domestic students primarily due to the lack of top-quality programmes in India.

Moreover, a degree from a top or a decent foreign university can positively change the potential career path. This is simply because exposure, worldview, work ethics and perspective that students learn in universities abroad help to make them more employable.

However, many qualified and well-deserving Indian students often find their dream of studying in a good institution abroad eluding them due to a lack of funds. Scholarships and grants are available to very few students and that too usually covers only a marginal percentage of the overall expenses one will have to bear when living and studying in a foreign campus.

The good news, on the other hand, is that new specialised education loan providers are offering exciting financing options to students
looking to pursue an education overseas. Yet, one has to look into each and every aspect of the loan offer issued by various financial institutions to make an informed decision. Here are 6 such factors to be kept in mind:

Decide the total amount you would require

Before applying for an overseas education loan, it is always better to evaluate the amount of money you would require for the entire duration that you’ll be studying abroad for. Apart from the tuition fees, it is equally important to take into account the boarding and lodging expenses, books, insurance, travel costs etc. before deciding on the loan amount required. The idea is to avoid being cash-strapped even after getting the education loan sanctioned.

Check your eligibility

Among all the other aspects, this is the most crucial one; to know whether you are eligible for an education loan or not. Your past academic performance and the ranking of future university/college/course play important roles. Also, the parental (and/or earning sibling’s) income is another criteria that lenders usually consider. While research based post graduate courses like M S in USA, specialised education loan providers are offering Rs 40 lakh education loans without collaterals. For larger loans for undergraduate studies abroad and other courses, you must also check whether you have sufficient collateral security like house, flat, non-agricultural land or fixed deposit, to offer against the loan. Both these aspects are significant to determine your eligibility for an education loan.

Check whether the product meets your requirements

Taking an education loan is a hefty commitment. Banks usually demand property collateral or any other liquid asset as a guarantee to the financier for securing the loan. Also, the repayment structures such as type of moratorium (complete moratorium or only principle moratorium), tenure of loans, fees, charges, EMIs etc. needs to be clear while planning. Good news is that nowadays, if you don’t have an asset to offer as collateral, don’t worry. Many financial institutions now also offer collateral-free loans. And since this is a form of unsecured credit, the interest rates may be slightly higher. But overall this would still be a more preferable option than leaving your higher education dream for lack of funding.

Repayment tenure

Usually, lenders offer a sufficient window period for repayment of an education loan abroad even after the course is complete. An average repayment period for bank’s education loans are usually 5 to 7 years whereas many institutions provide 10 to 15 years as the repayment tenure. Generally speaking, if the student and parents start servicing the simple interest during the course period and switches to full EMI after the completion of course and grace period.

Decide your Co-applicant

If you decide to opt for a loan amount that exceeds Rs 5 lakhs, you will be required to have a co-applicant. A co-applicant is a person that gets nominated for repayment of the debt, in case, the primary borrower of the loan fails to do so.

He/she is a person (mostly a parent) who has to sign the loan with you, agreeing to pay your debt, in case you fail to do so. As it is a very big commitment, applicants must take this aspect very seriously. They can nominate either their parents, spouses, parents-in-law, guardian or even siblings in some cases.

Compare the total costs of loans from different lenders

As you continue to do your research on loans being offered by various financers, you will notice the different interest rates accompanying them. Lenders develop their own criteria for the upper limit of the loan, the interest rate to be charged and the period as well as the mode of repayment. Thus, it is best to doa comprehensive evaluation of the different kinds of loans that are on offer. Moreover, it would be smart to not set hopes on just one bank or NBFC but apply to multiple financial institutions.

(The author is the CEO of Housing and Education loans, InCred)