Tips for Students Applying for Study Abroad Loans
India has seen an increasing number of students go abroad for higher education. Data from the Ministry of Foreign Affairs shows that, until July 2019, more than one million students were pursuing their studies in foreign countries. Besides factors such as exposure to diverse cultures and better career prospects, the availability of loans has also helped students achieve their dreams of studying abroad. For those planning to study abroad, here are a few things to look out for when applying for a loan:
Lenders available: Different financial institutions have different terms and conditions for offering loans. Before choosing the loan provider, check whether you need collateral for the amount or not, what the interest rate is and whether it is fixed or floating. Other aspects to consider are the need to have a co-signer, processing time, currency of borrowing, the costs the loan will cover, and the fees and charges it will incur.
Secured loans vs unsecured loans: Secured loans are secured by an asset which is offered as collateral in case the borrower does not repay. On the other hand, unsecured loans are sanctioned on the basis of the credit rating of the borrower and may require a co-signer. Students applying for a loan for an undergraduate program may not have a credit score. Therefore, they will need a co-signer who has a decent credit score. The co-signer does not need to be related to the student.
Fixed or floating ROI: Fixed interest rates are unaffected by market conditions while floating interest rates are. In the case of the latter, it will affect the IME. A fixed rate offers more security in the face of market fluctuations.
Online or in-person lenders: The processing of loans is faster in the case of online services. However, personalized service can offer a chance to negotiate interest rates.
Borrowing currency: Borrowing in the currency of the host country takes the stress out of changing the exchange rate. It also makes it easier to repay the loan if you plan to stay in the same country after completing your classes. However, compare the interest rates and make sure that the loan will cover all costs or only the full costs of the institution.
In addition to that, check if there are any other fees or charges besides interest. Make sure there are no hidden charges before signing the papers.
The writer is co-founder, Leap Finance