Going abroad and studying at one of the finest universities of the world is a dream many of us share; however, one common struggle most students face is the burden of the financial expense a study abroad program arrives with. Right from high tuition fees and accommodation charges, all the way to travelling costs, most students need to make a high amount of monetary investment in order to make their dreams come true. A common pathway chosen by most students is to opt-in for an education loan here in India and use the loan amount to fund their studies abroad.
However, as someone who is taking an education loan for the first time, I am sure that you must be having a number of doubts in your mind, and thus in today’s article, I will answer each of them for you.
But First, What Is an Education Loan?
One of the first and most important aspects we need to understand is the meaning of an education loan. In simple terms, an education loan can be understood as a financial lending instrument which you can leverage to secure a significant amount of funds (between ₹25 lakhs to ₹40 lakhs) to fund your dream of studying abroad. One of the key aspects of an education loan which separates it from the rest of the traditional lending instruments is the fact that you are only required to pay back the loan amount after you have completed your education and secured employment.
Most lenders across the world transfer the loan amount you request directly to the institution where you are enrolled on a per-semester basis and only request the student or their guarantor to pay the interest amount accumulated every month during the tenure of the course, and the principal amount can be paid once you have completed your education and secured your employment.
Along with this, most education loans in India arrive at highly competitive interest rates, meaning they won’t burn a hole in your pocket. But, despite these advantages, there are a number of aspects you should clarify before signing the loan agreement, and the most significant of them are as shared below.
1. Clearly Understand the Technicalities of the Loan
When you are taking an education loan, one of the first things you are required to do before signing on the dotted line is clearly understanding the terms and conditions of the loan. In order to ensure that your experience with an overseas education loan is pleasant, ensure that you go over the interest rate being charged, the total tenure of the loan, and the loan amortization schedule, along with the repayment method expected by the lender, with a fine-tooth comb such that you don’t miss out on anything.
It is important that you invest enough time and resources at this stage since you need to ensure that all your expectations are met while pertaining to the terms and conditions outlined by the lender.
2. Decide on the Loan Amount
As I shared in the introduction paragraph of the article, most lenders across the country offer education loans in the range of ₹25 lakhs to ₹40 lakhs for overseas education; however, it is not necessary that you take the entire loan amount even if you do not require it.
One of the first things you should do is, sit down with your university brochure and the lender and decide on the expenses you want to be covered by the lender and those you can cover on your own. In general, most lenders cover the tuition charges of the university upfront, along with providing you some additional amount each month for other expenses such as accommodation, books etc. Along with this, these days, there are lenders who give you the option of choosing and customizing your exact expenses such that all your needs are met.
Thus, at this stage, decide on all your expenses and arrive at the final loan amount you will need from the lender.
3. Decide on the Repayment Methodology
Most lenders across India offer borrowers two different styles of repayment when it comes to education loans. In the first case, lenders require you to start repaying once you have secured employment after completing your education, and in the second case, you are requested to pay only the accumulated interest amount every month and pay back the rest when you are employed. In my opinion, the second option would be suitable for most, as it would significantly reduce your EMI liability further down the line.
Thus, at this stage, you need to sit down with the lender and decide on the repayment style which suits your needs the most and follow the same appropriately.
4. Choose Your Lender Wisely
Unlike other traditional lending instruments, which generally arrive with a tenure of 5 to 7 years, when you take an education loan to pursue your dreams of studying abroad, you will need to develop a long term relationship with your lender and thus establish rapport with them. Keeping the same in mind, during your initial interactions, you need to ensure that you ask questions regarding any queries or doubts you may have, thus ensuring that you fully meet the extent of the loan terms and conditions. Establishing a long term working relationship and rapport with the lender will ensure that your requests get fulfilled faster, and all your queries get answered on priority.
5. Track Your Repayment
Last but not least, ensure that you keep an active tab on your repayment from day one. In either of the repayment strategies you chose earlier, you are encouraged to keep aside funds every month, such that you can make your repayments in the coming days consistently. Along with this, you will also need to ensure that you keep track of your credit score and report any inefficiencies to your lender for urgent fixing.
Related Article: Education Loan Interest Rate Calculator
Finding and availing of the features of the right education loan can become the doorway to fulfil your dream of studying abroad. Thus, the next time you sit down with your lender, keep all the above information in mind and decide wisely.
All the best.