Steps to Choose the Right Study Abroad Loan
All the steps in your study abroad journey have their own significance. Doing well in tests like GRE, IELTS, GMAT, etc., choosing the colleges, arranging funds, and getting the visa are some of the steps. Among them, abroad education loans are perhaps the most difficult to understand.
Banks and other financial lenders in the country have made getting an abroad education loan relatively simpler so that you can get the benefits of the study loan schemes. With some assistance and study, you can also choose the abroad education loan most-suitable for you.
Let’s look at some of the key points and steps to select the best education loan product.
Table of Contents
Selecting the lender
There is no dearth of lenders in the finance market providing education loans to study abroad. While this plenty has made it easier to get a study loan, selecting the right lender has become a bit cumbersome. The major categories of financial lenders in India are – public sector banks, private banks, and Non-Banking Financial Companies (NBFCs). Each lender has its pros & cons and you must compare all your options and terms & conditions judiciously while picking the lender.
Choosing the type of loan
There are two sorts of abroad education loans – Secured and Unsecured. Secured education loans involve pledging collateral or security to back up the loan amount borrowed. The loan amount that can be taken in form of secured loans tends to be high with lower interest rates. With loans without collateral, you can borrow up to INR 40 lakhs with a rate of interest starting at approx. 11%. The eligibility for an unsecured loan is a co-applicant with income apt to pay the interest during the study period and an adequate CIBIL score of more than 675.
Calculating the loan amount for all your expenses
High volume education loans can be taken to cover the cost incurred. You can avail of up to INR 1.5 crore for your higher studies overseas from certain lenders as a secured loan, based on the course and country you are going for. Compute your expected costs such as tuition fees, living expenses, accommodation, air tickets, equipment purchase, etc. to get an idea of the sum you’d need. Most financiers give loans for 100% of the expenditures.
Selecting the lowest rate of interest possible
Interest rate is one of the vital elements of a loan shaping the extent of your financial load. Government banks offer the lowest rates of interest starting from about 8%. Private banks and lenders incline to charge a little higher, from around 11%. You must also consider whether the nature of interest is floating or fixed. Most of the banks and NBFCs in India offer floating interest rates that can change as per the market conditions. NBFCs tend to change their interest rate more frequently.
Knowing your loan eligibility
Loan eligibility can change from lender to lender and student to student. In the case of secured loans, the market value of the collateral should be more than the required loan amount. In the case of unsecured loans, the monthly income of the co-applicant should be adequate enough to pay the monthly interest. The co-applicant in the loan should be an Indian citizen.
Applying for the education loan
After making your mind about what is the type of loan, financial lender, and required amount, you can apply for the education loan. You can make this process easier by approaching GyanDhan. It is India’s first education financing marketplace that has provided free help to thousands of study abroad aspirants in getting the study abroad loan with the right lender. It has partnered with leading financial players in India including top government banks, private banks, and NBFCs.
Other crucial elements of the abroad education loans
Loan tenure, repayment tenure, processing fees, and moratorium period, are equally vital elements to consider before finalizing the abroad education loan.
- Loan tenure – Lenders offer 7 to 20 years as the loan tenure to make the loan repayment easier. But, it is advisable to first estimate the total interest you will be paying in your loan tenure and the difference in monthly installments before you decide the loan tenure.
- Processing fees – It is the sum you have to pay to the bank to process your education loan application. The processing fees can be anywhere from 0% to 5%.
- Moratorium period – It is the term where you are not required to make any loan repayments. This period is also known as repayment holiday and usually encompasses the study period plus 6 to 12 months. The principal amount repayment starts after this grace period. The loan applicants must keep in mind that a simple interest or partial interest may be charged during the moratorium period, depending upon the type of the loan and lender.