To get a high quality education, getting admitted in renowned foreign universities is a dream of many meritorious students. However, apart from getting a chance to join such a university, for going and staying there, arranging foods, commuting etc, one needs finances and proper financial planning for the same.
In case of no scholarships or grants, a student will have to look for family support or an education loan to ensure that the dream of studying abroad comes true.
“For most students, the hunger to get a quality education from reputed overseas universities is nothing short of their most aspiring dream. But, without proper financial support, this dream is often cut short,” said Prashant A Bhonsle, founder and CEO of Kuhoo Fintech.
“But thanks to modern technology and new players in the education loan category like Kuhoo Edufintech, Leap Finance, InCred and Prodigy etc, students aiming to study abroad have a relatively dynamic way to finance their education. Kuhoo provides loans without collaterals and most of the time without involving parents,” he added.
Bhonsle lists the following 10 steps that are to be considered and pay attention to while arranging for an education loan:
1. Scholarships, grants
You should start with checking for any scholarships and/or grants that you may be eligible for, in the universities that you have applied to.
2. Financial planning
A good loan application is part of a diligent financial plan, designed for optimal costs for funding your foreign education.
The critical components of the plan include scholarships/ grants, prior savings and education loans. Put some time to find the right amount of loan by balancing it with redeeming your investments.
Many times people tend to overlook that the entire interest component of an education loan is deductible under Income Tax Provisions. So, if you are going to fall in the higher income bracket when you start earning, it might be better to repay the education loan at an interest of 10-12 per cent rather than paying tax of 30 per cent on the income.
3. Total outlay
When looking at different financing options, keep in mind that lower Rate of interest is not the key point of consideration. One should see how much is the total outlay per lakh, which could include processing fees, insurance charges, one time charges, foreign exchange rate etc.
4. Loan structure
Pay attention to your loan structure which includes Rate of Interest, Repayment Tenure etc. Lots of students while applying for the loan feel that if they opt for a longer tenure, they would pay more interest which is not the case.
Firstly, even if you get a loan to be repaid in 10 years and later on, you feel you can pay higher EMIs, the interest component of your EMIs would be reduced and adjusted for the actual time of repayment.Secondly, it is in the student’s interest to go for a larger tenure loan initially because a lower EMI in the beginning of the career reduces the risk of default which may otherwise lead to a lower Credit Rating.
5. Other key components
Some other key components of a foreign education loan include insurance coverage and foreign exchange rate etc. It is crucial to compare these levies from different service providers to assess your best option.
6. Processing time
Another vital factor is the processing time involved for loan sanction. Considering many universities ask students to reserve their seats on time, having a loan on time is necessary which means it is equally imperative to check for time lag between loan sanction and loan disbursals. One needs a clear understanding of the processes for disbursals of subsequent tranches too. It should not happen that when your fees for the next term becomes due and you are in the middle of your assessments, you are losing crucial time chasing your next disbursal.
7. Try different options
All of the above mentioned factors lead to this crucial point. One should apply to more than one lender. It reduces your dependency and uncertainty. In many cases, compared to traditional lenders, new-age platforms like Kuhoo, allow students to get collateral free loans within 15 days.
8. Post disbursement support
Evaluate how robust are their post disbursement support and service. It includes issuance of interest certificate, address change, prepayment penalties, EMI changes etc.
9. Other products offered
Explore availability of other products and services provided by the lender.
Some important things that can make a big difference are:
Credit CardsSavings Bank AccountInsurance / Foreign exchangeInvestmentsRemittances
A viable and easy way to supplement one’s funds is through referrals. So check, if there are any referral schemes being run by your finance partner.
“While an education loan is an excellent way to support the study abroad dream, parents and even students should start thinking about finances long before applying to a university or for a loan. It can only be done by doing smart savings and investments as early as possible. The overseas higher education goal is a big budget step for a middle-class family and a cumulated saved amount or SIP funds can go a long way in securing the finances for this dream,” said Bhonsle.