India has seen an increasing number of students going abroad for higher studies. Data from the Ministry of External Affairs shows that, till July 2019, more than one million students were pursuing their education in foreign countries. Apart from factors such as exposure to diverse cultures and better career prospects, the availability of loans has also helped students follow their dreams of studying abroad. For those considering study abroad options, here are few things to look out for when they are applying for loans:
Available lenders: Different financial institutions have different terms and conditions for offering loans. Before choosing the loan provider, check whether you need a collateral for the amount or not, what the interest rate is and whether it is fixed or floating. Other aspects to consider are whether a co-signer is required, processing time, currency of borrowing, the costs the loan will cover and the fees and charges it will incur.
Collateral vs non-collateral loans: Collateral loans are secured by an asset that is offered as security in case the borrower fails to repay. On the other hand, non-collateral loans are sanctioned on the basis of the borrower’s credit score and may require a co-signer. Students applying for a loan for an undergraduate programme may not have a credit score. Therefore, they will need a co-signer who has a decent credit score. It is not necessary for the co-signer to be related to the student.
Fixed or floating ROI: Fixed interest rates are not affected by market conditions whereas floating interest rates are. In the case of the latter, this will affect the EMI. A fixed rate offers more security from market fluctuations.
Online vs. in-person lenders: Processing of loans are faster in the case of online services. However, a personalised service may offer a chance to negotiate interest rates.
Currency of borrowing: Borrowing in the host country’s currency eliminates the stress of change in the rate of currencies. It also makes it convenient to pay back the loan if you are planning to stay in the same country after finishing your course. However, compare the interest rates and ensure whether the borrowing will cover all the charges or just the total institution fee.
Besides this, check whether there are any other fees or charges apart from the interest. Ensure that there are no hidden costs before you sign the papers.
The writer is Co-founder, Leap Finance
