Choosing A Study Abroad Loan: A Detailed Guide
Every step in your abroad education journey has its own importance. Scoring well in tests like GRE, IELTS, GMAT, etc., shortlisting the colleges, securing funds, and the visa process are some of the steps that lead to your abroad studies. Among all of these steps, abroad education loans are considered the most difficult to understand by the students.
Banks and other financial lenders in India have made the abroad education loan process relatively simpler so that the students can get the benefits of the loan schemes. With a little assistance and study, you can also select the education loan suitable for you.
Let’s have a look at some of the major points and steps to select the apt education loan product.
Select the lender
There is no shortage of lenders in the Indian finance market offering education loans to study abroad aspirants. While this abundance has made it easier for students to get an education loan, choosing the right type of lender has become a bit complicated. The main categories of financial lenders in India are - public sector banks, private banks, and Non-Banking Financial Companies (NBFCs). Every financial lender has its pros and cons and you must compare all your options and terms & conditions carefully while choosing the lender.
Choose the type of loan
There are two types of education loans - Secured and Unsecured. Secured education loans require you to pledge collateral or security to back up the loan amount borrowed. The quantum of finances available in secured loans tends to be high with lower interest rates. With unsecured loans, you can borrow up to INR 40 lakhs (even more in a few cases) with a rate of interest starting at around 11%. The eligibility for a loan without collateral is a co-applicant with enough income to pay the interest during the study period and a good CIBIL score.
Calculate the loan amount required to cover all your expenses
High volume education loans are obtainable to you to cover the cost incurred. You can take up to INR 1.5 crore for your higher studies abroad from certain lenders as a secured loan, depending on the course and country you are going for. Calculate your expected expenses such as tuition fees, accommodation, living expenses, equipment purchase, air tickets, etc. to get an idea of the amount you’d need. Most lenders give loans for 100% of the expenses.
Select the lowest interest rate possible
Interest rate is one of the crucial elements of a loan determining the extent of your financial load. Government banks offer the lowest interest rates starting from around 8%. Private banks and private lenders tend to charge a little higher, starting from around 11%. The nature of the interest rate should also be taken into consideration - Fixed or Floating. Most of the education loan lenders in India offer an interest rate that fluctuates during your loan tenure. It can increase or decrease as per the market conditions. This rise in interest rates is more with the NBFCs.
Know your eligibility
The eligibility for a loan can differ from case to case and lender to lender. The co-applicant should be an Indian citizen. In an education loan with collateral, the market value of the Security pledged should be more than the loan requirement. In an unsecured education loan, the monthly income of the co-applicant should be sufficient enough to make the interest payments.
You can simply check your loan eligibility on GyanDhan’s Loan Eligibility Tool.
Apply for the loan
After deciding the type of loan, financial lender, and loan amount, you can apply for the loan. You can further make this process easy and simple by approaching GyanDhan. It is an education-financing-focused platform that has helped thousands of students get abroad education loan from the right lender. In order to make the loan process smooth, it has partnered with several lenders including government banks, private banks, and NBFCs. You are assigned a personal education loan counselor that guides you throughout the process.
It is important to note that its loan assistance service is absolutely free of cost!
Other key elements of the study abroad loans
Loan tenure, processing fees, repayment tenure, and moratorium period, are equally important elements to consider before finalizing the education loan.
- Loan tenure – To make the loan repayment easier for you, lenders offer 7 to 20 years as the loan tenure. But, it is sensible to first estimate the total interest you will be paying during the loan tenure and the difference in EMIs before you decide the loan tenure.
- Processing fees - It is the amount you have to pay to the lender to process your education loan application. It can be anywhere from 0% to 5%.
- Moratorium period - It is the duration where you are not required to make any repayments. This period usually consists of the study period plus 6 to 12 months. The loan repayment starts after this grace period. You should note that a simple interest or partial interest may be charged even during this period, depending upon the lender.