Studying abroad is a big step that requires thorough planning. Thus, education loans can go a long way in bridging the difference between your personal savings and the total expense of tuition & living expenses for most Indian students.
Before applying, learning more about how loans work can help students compare lenders, calculate future repayments and create a more accurate budget for studying abroad.
What are the things that an education loan can be used for?
Students also have to know that an education loan may include the following eligible expenses based on the lender and repayment product:
- Tuition fees
- Accommodation
- Examination fees
- Travel expenses
- Books and equipment
- Insurance
- Other approved education-related expenses
However, coverage tends to vary by lender (and by loan agreement). Before accepting a loan, students should inquire into its particulars.
How much should you borrow?
The mindset of borrowing the maximum amount available is not always good value for money.
Start by calculating:
Estimated loan requirement = total education cost – scholarships – savings – family contribution
It gives good insight on the extent of the funding that may well be required.
Secondly, students should make a reserve fund and not put every available dollar toward tuition.
Secured vs unsecured education loans
Indian students will be able to avail both secured and unsecured education loans.
You might think about a secured loan that would be supported by collateral belonging to the borrower — like property or some other accepted asset. Since the lender has collateral backing repayment, interest rates and lending limits can vary significantly from unsecured products.
These types of funds do not usually require personal security, although they may have different qualification criterions, interest levels, limits or co-signer conditions.
The best option varies based on student circumstances and lender conditions as well.
What lenders evaluate
There are multiple factors that lenders will look at when assessing an application.
These can include:
- University and program
- Admission status
- Course duration
- Tuition fees
- Academic background
- Co-applicant profile
- Credit history
- Collateral, where applicable
- Expected earning potential
Rachel Kim, a senior policy analyst at the Student Borrowers Protection Center, wrote that students should shop around rather than taking the first loan they come across; too many end up with bills they cannot pay.
Interest rates and repayment
Interest rate is one of the most essential factors to compare.
Do not refer only to the figures advertised. Inquire about processing fees, repayment terms and conditions, moratorium period, prepayment rules & penalties on delayed payments — so that you can make an informed choice.
Students also need to know while they are in school interest is accruing or if certain payments must be made before graduating. While a lower monthly payment sounds nice, it can also mean you will be paying all around more for the loan!
Planning the repayment
Before taking a loan for study In US or Study in UK— it is important to calculate how repayment fits into future income.
For example, try out some repayment scenarios using conservative salary assumptions. Never expect that you would directly get a job with a big salary at graduation time.
Scholarships can reduce borrowing
Students must look at scholarships and other funding avenues in reduction of their mortgage quantity as soon as they take a seat down roughly for determining the cash to be taken via loans.
Education USA advises to close the financial planning early, and take into account university scholarships, other funding, loans and assistantships. Partial funding can even cut down on the borrowing amount that one gets and thereby cut down eventual repayment pressure.
What Imperial Overseas can assist in
Imperial Overseas Education Consultants helps with university selection and planning finances, and the whole admissions journey. However, students need to do an apples-to-apples comparison between loan products with lenders and read the finely printed way before they sign.
Since a loan is a legal financial contract, applicants must be able to review all repayment obligations.
QUESTIONS TO ASK FOR AN EDUCATION LOAN– A practical checklist:
- What is the amount in Sanction?
- What is the interest rate?
- Fixed or variable the rate?
- What fees are charged?
- What is the repayment period?
- When does repayment begin?
- During the period of study, what is interest capitalised or accrued on?
- Is collateral required?
- Can the loan be prepaid?
Final thoughts
While an education loan makes international education easily accessible, it is still a long-term commitment and should be considered as such. If you plan on pursuing education for study in UK or study in US, determine the cost of your education before looking at scholarships first, compare lenders and only borrow what you need. You just have to do a little digging and find a good loan for your education; one that will not burden you in the future.
Ready to conquer your dreams? Get in touch with Imperial Overseas expert study abroad counselors and kick-start your journey towards studying abroad today! You will have support during university admission, scholarship application, visa preparation and many more!
