Choosing an education loan to finance studies abroad is as difficult as choosing a college and course abroad. Often parents, instead of doing their due diligence on their own, rely too much on educational counselors and end up with a bad college or course that doesn’t guarantee a good job prospect.
Likewise, an overreliance on credit counselors can put parents at a disadvantage. Education loan for study abroad should always meet the needs of an applicant and experts say that besides your pocket, several other factors such as country, college, course and its duration, the interest rate among others must be taken into account before accepting an offer. So here are five things experts advise them to keep in mind when deciding on a student loan.
Avoid secured loans if possible: keep real estate such as a house, land, etc. as collateral for a loan amount is quite risky for any parent even if the applicant has been admitted to a highly sought after course at a top university. Experts say that sometimes some middle-class parents get too excited when their ward is admitted to Ivy League institutions. They take out loans with their houses as collateral, which is not at all advisable.
“A secured loan puts pressure on the collateral holder, and in the case of a co-signer loan, there is a social obligation attached to the loan. Either way, your parents’ house and credit could be on the line if things don’t work out,” Sasha Ramani, associate director of corporate strategy at MPOWER Financing, a US-based fintech company which offers student loans to very promising companies. international students.
A fixed interest rate is preferable to a variable rate: parents often find floating or variable interest rates attractive because they seem cheaper with low interest rates. However, experts suggest otherwise.
They say that since in the rising rate environment currently prevailing, variable rates may appear lower at first but may rise over time depending on economic factors. Additionally, some lenders offer discounts that help lower the net interest rate over the term of the loan.
“Along with that, currency fluctuation is another factor that most applicants forget to consider for currency fluctuation. So keep this in mind when marking your budget and loan amount,” Ankit Mehra, IIT Kanpur alumnus and founder of an education finance market GyanDhan.
A loan from a foreign country is preferable: financial consultants say that it makes more sense to get a loan from the country in which an applicant has been admitted than from the country of origin.
“Take for example, students hoping to study in the United States may prefer a loan from a US lender: a US dollar loan issued by a US lender can help students establish a credit history in the United States, which can be extremely helpful after graduation,” Ramani mentioned.
He added: “Ask your school about potential loan options. Your university may be very familiar with reliable and flexible lenders to meet student needs. »
Educate yourself, take advantage of post-loan services from lenders: Many lenders, especially those in the home country, offer several post-loan benefits, such as free professional support after graduation, assistance with immigration and visas, and access to housing and other commodities.
“These benefits can add up and help make your international education experience much more seamless and provide a strong return on your educational investment,” said a head teacher at a US-based company.
Make sure the lender covers expenses in addition to tuition fees: a long-term application requires a lot of planning and preparation. Apart from taking care of the basic things such as eligibility criteria, understanding loan terms, documents required for submission and loan processing time, a parent should prepare, before applying for the loan, an annual budget.
“The annual budget should include expenses such as tuition, accommodation, meal plans and food, health insurance, internet and phone bills, and personal care expenses. Then prepare a separate list for their budget, including family contributions, external scholarships, college financial aid, and income you can generate through part-time jobs,” Mehra said.
He added, “Finally, decide on the required loan amount after calculating the expenses you can manage through the pocket. Make sure the lender you are targeting covers expenses in addition to tuition.