Studying abroad is a popular option for students seeking a unique and valuable educational experience. Studying in a foreign country can provide opportunities to learn about different cultures, languages, and ways of life. Additionally, studying abroad can help students build a global network of contacts and enhance their career prospects by developing highly valued skills in today's globalised job market.
For many students, the high cost of studying abroad can be a barrier to pursuing their dreams of studying abroad. However, the cost of studying abroad is high. In addition to tuition fees, students must consider accommodation, transportation, and living expenses. Here is the list of 9 factors to check during abroad education loan process.
Eligibility Criteria
When applying for an education loan, it is important to check the eligibility criteria set by the lender. Generally, lenders have specific requirements that applicants must meet to be eligible for a loan. Eligibility criteria may vary depending on the lender and the country where the student plans to study.
Some standard eligibility criteria for education loans include age limit, academic record, admission to a recognised course or institution, and a co-signer. For example, some lenders may require that the applicant be between 18 and 35 years old. Others may require that the applicant has a minimum GPA or academic score. Additionally, most lenders require that the student has been admitted to a recognised course or institution and that the lender approves the institution.
A co-signer is typically someone with a good credit history who agrees to take responsibility for repaying the loan if the borrower cannot do so. The co-signer can be a parent, guardian, or any other individual willing to take on this responsibility. A co-signer is also often required for education loans.
Loan Amount
One of the important factors to consider when applying for an education loan for studying abroad is determining the total cost of education. This includes various expenses such as tuition fees, living expenses, travel costs, and other expenses like books, supplies, and health insurance.
Tuition fees vary based on the program and institution chosen. Students should research the exact tuition fees for their chosen program and institution. It is also important to consider other expenses like accommodation, food, transportation, and personal expenses while studying abroad.
Interest Rates
When considering an education loan for studying abroad, it is important to compare the interest rates offered by different lenders. The interest rate on loan can vary based on several factors, including the loan amount, repayment tenure, and the borrower's credit history.
Typically, interest rates on education loans are higher than those on other loans. A lower interest rate can lead to significant savings over the life of the loan. Therefore, students should carefully compare interest rates offered by different lenders to find the most favourable option.
Apart from interest rates, students should also look for lenders who offer flexible repayment options. Some lenders may offer a grace period after graduation, during which students do not need to start repaying their loans. Other lenders may offer different repayment plans, such as fixed or variable interest rates or the ability to make partial payments while still in school.
Additionally, students with a good credit history can negotiate lower interest rates with lenders. A strong credit history shows that the borrower is responsible and more likely to repay the loan on time.
Repayment Terms
When you take an education loan to study abroad, you must repay the borrowed money and interest. The terms of repaying the loan may differ depending on the lender.
It is important to understand the repayment terms offered by the lender, which include the amount of time you have to pay back the loan (called the repayment tenure), how often you need to make payments (called the frequency of repayment), and if there are any charges for paying off the loan early (called pre-payment charges).
Choosing a repayment plan that works for you and fits your budget is important. This means you should choose a plan you can realistically pay back on time without straining your finances. Before signing any agreement, make sure you understand all the terms and conditions of the repayment plan to make informed decisions.
Collateral
When you take an education loan to study abroad, the lender may require you to provide collateral, a valuable asset you pledge as security for the loan. This helps the lender to mitigate the risk of loan default.
Collateral could be property, shares, fixed deposits, or any other valuable asset the lender accepts. Before applying for the loan, ensure you have the required collateral or a co-signer who can provide the collateral on your behalf.
Ensure you read and understand the collateral agreement carefully before signing any documents. It's essential to understand the terms of the collateral agreement, which includes the type of collateral required, the value of collateral needed, and what happens to the collateral if you fail to repay the loan. You should also understand the process for releasing the collateral once the loan is fully repaid.
Processing Time
When you apply for an education loan to study abroad, it's important to consider the processing time for the loan application. The processing time refers to the time the lender takes to review and approve your loan application and disburse the loan amount.
The processing time may vary from lender to lender, and it could take several weeks to a few months, depending on the complexity of the loan application, documentation requirements, and other factors. It's important to factor this processing time into your plans so that you can apply well before your intended start date for the program.
Starting the loan application process as early as possible is advisable to avoid any last-minute delays. This will give you enough time to gather all the necessary documents, complete the application process, and receive the loan amount before your program start date. It will also give you time to deal with any unexpected delays or issues that may arise during the loan application process.
Documentation
The documents required may vary depending on the lender and the loan amount, but generally, you will need to submit the following documents:
Admission Letter: This letter from the educational institution confirms your admission to the program.
Academic Records: This includes your transcripts and degree certificates from your previous educational institutions.
Income Proof: This includes income tax returns, payslips, or bank statements demonstrating your ability to repay the loan.
Collateral Documents: If the loan requires collateral, such as property or fixed deposits, you must provide the relevant documents.
Passport: This is required to verify your identity and to confirm that you are a citizen of the country where you plan to study.
Credit Score
A credit score is a numerical representation of an individual's creditworthiness based on their credit history. Lenders use this score to assess the likelihood of the borrower repaying their loan on time. When applying for an education loan, having a good credit score can increase your chances of approval and improve the terms of your loan, including the interest rate and repayment period. It is essential to regularly check your credit score and ensure no errors or discrepancies in your credit report. If there are any issues, they should be resolved before applying for the loan. Having a co-signer with a good credit score can also improve your chances of loan approval and better loan terms.
Foreign Exchange Rate
When taking an education loan for studying abroad, it is essential to remember that the loan amount will be disbursed in foreign currency. The exchange rate between the home country's and foreign currency may fluctuate over time, impacting the amount of money that needs to be repaid. If the foreign currency strengthens against the home currency, it will increase the loan amount's value in the home currency and vice versa. This can result in a higher or lower repayment amount, respectively. It is investigating the exchange rate risks while planning and budgeting for the education loan is advisable. It is also advisable to keep a buffer for any unforeseen fluctuations in the exchange rate. Some lenders may also offer hedging options to mitigate the exchange rate risks, and it is worth exploring these options while selecting a lender.
