India has seen a growing number of students going abroad for higher studies. Data from the Ministry of Foreign Affairs shows that, as of July 2019, more than one million students were continuing their education in foreign countries. In addition to factors such as exposure to diverse cultures and better career prospects, the availability of loans has also helped students pursue their dreams of studying abroad. For those who are considering study abroad options, here are some things to keep in mind when applying for loans:
Available Lenders: Different financial institutions have different terms and conditions for offering loans. Before choosing the lender, check if you need a guarantee for the amount or not, what is the interest rate and if it is fixed or floating. Other things to consider are whether a co-signer is required, the processing time, the currency of the loan, the costs the loan will cover, and the fees and charges it will incur.
Secured vs. Unsecured Loans: Collateral loans are secured by an asset that is offered as collateral in the event that the borrower defaults. On the other hand, unsecured loans are sanctioned based on the borrower’s credit rating and may require a co-debtor. Students applying for an undergraduate loan may not have a credit rating. Therefore, they will need a co-signer who has a decent credit score. The co-signer does not have to be related to the student.
Fixed or floating ROI: Fixed interest rates are not affected by market conditions, while floating interest rates are. In the case of the latter, this will affect the EMI. A fixed rate offers more security against market fluctuations.
Lenders online or in person: Loan processing is faster in the case of online services. However, a personalized service can offer the opportunity to negotiate interest rates.
Loan currency: Borrowing in the host country’s currency eliminates the stress of exchange rate change. It also makes it convenient to repay the loan if you plan to stay in the same country after finishing your course. However, compare interest rates and make sure the loan covers all charges or just the full institution fee.
In addition to this, check if there are any other fees or charges in addition to interest. Make sure there are no hidden costs before signing the papers.
The writer is a co-founder of Leap Finance.