study loan: Before applying for a study loan to finance your studies abroad, read this

Aspirations for overseas education often die prematurely due to the perception that it is an expensive affair. In addition to the common myth, study abroad is only for the wealthy. While studying abroad has its share of expenses to bear, it is not out of reach with good planning, as the data on education abroad reaffirms. According to the recently released Redseer report, more than 7,50,000 Indians were studying in foreign universities before the pandemic, spending $24 billion in economies outside India. This number of students is expected to reach approximately 1.8 million by 2024, resulting in expenditures of nearly $80 billion.

The return on investment of education abroad, the globally recognized degrees and the quality of education make it an attractive choice. As the demand for overseas education increases, it has become more affordable through loans and expanded choices. Whereas previously Australia, the United States, the United Kingdom and Canada attracted the most students, Germany, Spain, France, the Netherlands, Italy, Dubai and Malaysia , among other destinations, have become a common choice.

Financial planning for higher education

The cost of attending overseas institutions includes tuition, club and activity fees, health insurance, accommodation, meals, transportation, books and supplies, personal expenses and variety, to name a few. Other heads are usually an additional expense almost equal to the tuition charged by the university each year. Student loans cover the tuition fees prescribed by the university. It also includes the total cost of participation and the cost of economy class travel to the country of destination.

Higher education abroad is usually funded by savings, scholarships and loans. While scholarships are an indeterminable aspect, savings and loans are things that people plan for and should self-assess. Higher savings reduces the applicant’s loan burden, decreasing EMI and repayment duration.

Financing higher education abroad

Student loans relieve the immediate burden of financing higher education. In India, various banks and non-bank financial companies (NBFCs) offer student loans for higher education purposes. These organizations offer secured and unsecured student loans. While public sector banks offer unsecured loans (unsecured loans) up to Rs 7.5 Lakh, with a co-applicant, NBFCs like Avanse and Credila allow larger unsecured loans for a duration of less 2 years old. There are other NBFCs that offer students a higher unsecured loan without collateral. These organizations, however, fund students who have received offers of admission from Tier 1 institutions in the United States, Canada, the United Kingdom, and very few institutions outside of North America.

Indian banks or India-based banks offer higher secured loan amount (Rs 15-20 Lakh) to aspirants who have a co-applicant with a minimum monthly salary of Rs 50,000. Online financiers like Prodigy Finance and MPower Financing are few among financiers who assess student profiles for unsecured loans without co-signers.

Co-applicants and guarantees for student loans

Co-applicants and guarantees help mitigate risk for lending banks. Secured or unsecured college loans usually require an aspirant to have a co-applicant who co-signs the college loan agreement. Although banking institutions prefer parents, siblings, grandparents and first-blood relatives as primary co-applicants for student loans, they also have provisions for secondary applicants (financial co-applicants) for exceptions. in some cases. Multiple co-applicants are permitted in cases where the primary co-applicant does not have a stable income or permanent income.

While co-applicants must have good credit standing, guarantees must have tangible value. Acceptable collateral instruments are constructed goods with clear ownership. For secured student loans, two types of collateral are accepted: real estate and liquid securities. Collateral assets are appraised by bank-approved appraisers who value the property on three parameters: fair market value, realizable value and deferred value.

While house, flat or non-agricultural land with a boundary wall are the only real estate accepted, fixed deposits, LIC policies and government bonds are the liquid securities that banks accept. Liquid securities are taken into account according to different parameters such as the face value of government bonds, the surrender value of insurance policies and the principal value of term deposits. The official documents and deeds are handed over to the lending bank after evaluation for the loan application.

Student Loan Feasibility

Student loans have longer tenors and lending banks also offer a moratorium period of six months to a year for the aspirant to start earning money before starting their IME. On the other hand, unsecured loans do not have a moratorium period; thus, reimbursement starts immediately after the first disbursement. Moreover, the interest rates are floating, which very much depends on a number of factors such as the country of destination, the educational institution, the program, the repayment capacity of the co-borrowers, the credit history and warranties.

Self-assessment of loan requirements thus becomes an important aspect for all aspirants who aspire to achieve their academic dreams. With the right planning, studying abroad is not a far-fetched dream for anyone! The education loan helps aspirants realize their dreams of studying abroad and get a 150-200% return on their educational investment.

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