Record numbers of Indians are seeking an overseas education, driven by competition at home and the prevalence of high-calibre schools abroad. But these schools are difficult to afford without the assistance of a loan. How can students find the best loan provider and financial products for their circumstances?
The interest rate or APR?
Some lenders charge fees that aren’t visible in the interest rate. Many countries, therefore, regulate the disclosure of APR (annual percentage rate), which includes both the interest rate and other costs associated with the loan. However, some lenders still charge fees that escape the APR calculation, such as prepayment fees and the requirement to purchase life insurance, so borrowers shouldn’t blindly rely on the APR when comparing quotes, especially between different countries.
Many lenders require collateral, co-signers or guarantors, co-applicants, co-borrowers, and other forms of security. Though these may reduce your interest rate, they could also put a financial burden on your family. So before making decisions, weigh your preference for financial independence against a higher interest rate.
Fixed or Floating?
Students should also consider whether the interest rate is fixed or floating. Many lenders promote a floating loan, or variable rate loan, where the interest rate changes based on other reference rates. This means that students bear the risk and that monthly payment may rise over the life of the loan. More budget-conscious students may, therefore, prefer fixed-rate loans, which do not vary.
Students should consider which currency their loan is in. Though a rupee-denominated loan may sound appealing if the currency depreciates, this reduction is not guaranteed and instead may impose costs on students. For example, if the rupee depreciates significantly, a loan may become insufficient to cover tuition. Additionally, students who remain abroad after graduation may prefer the stability and predictability of payments in the same currency as their earnings.
Lender’s home base
Similarly, students attending university in the U.S or Canada may want to use a lender based in those countries. Local lenders are familiar with necessary visa requirements and also are able to cover a wider variety of schools, expenses, and fields of study due to their relationships with universities.
Establishing a credit profile
Students who desire to remain overseas after graduation will need a credit score to open credit cards, lease an apartment, or even as part of a job interview. Starting and building a credit profile while studying abroad is therefore essential for positioning one’s self for success.
Additional student support
Some lenders offer a wide variety of student support, such as scholarships, career readiness preparation, flexible payment options, and forbearance. These financial and professional resources can help ensure that students feel cared for and confident in their future.
Overseas education can be a personal and professional game changer. Foreign education can offer students an intellectual challenge as well as transform them into world-leaders, comfortable operating in a cross-cultural professional and social environment. Picking the right student loan provider will help ensure students succeed in all their endeavours.