As the rupee continues to weaken against the dollar, the cost of living for students studying abroad has risen, forcing them to take extra loans to meet their expenses. They must carefully consider several factors before taking an education loan within India or outside India.
The interest rate is likely to be lower when you decide to study within India. Though the difference is not very significant, you should be ready with your repayment strategies to avoid surprises. It ranges between 8-14% depending on your profile, education loan amount, credit score and other criteria.
Exchange rate fluctuations
If you are taking a loan outside India, be aware that the loan will be in a foreign currency. Understand the visa and immigration requirements for the country where you plan to study. Your loan may be contingent on securing the necessary visa.
Research the interest rate structure and currency risks. Changes in exchange rates can affect your repayment obligations significantly especially when finding a job gets delayed. However, if you get a job in a foreign country and earn in that country’s currency from where you have borrowed the loan, it may not impact you much. Some foreign lenders may require a credit history or co-signer/guarantor in the host country. Prepare accordingly and be aware of any local credit score requirements.
Understand how the loan disbursement process works, especially if it involves sending funds from India to a foreign account. Familiarise yourself with the repayment rules, including any early repayment penalties or grace periods. Comply with all legal requirements in both India and the host country. You can also consider insurance options to protect against unforeseen events that might impact your ability to repay the loan.
Repayment tenure
Opt for a repayment tenure that aligns with your future income prospects. Longer tenures may reduce monthly EMIs but result in higher overall interest payments. Some banks may require collateral based on the loan amount. Know the collateral requirements and their implications. Study the repayment schedule, including the grace period after course completion, and plan your finances accordingly. Students borrowing from Indian financial institutions typically get a moratorium period after they complete their education.
Some loans may offer flexible repayment options, such as income-based repayment plans. Explore these choices to manage your finances efficiently. If you don’t meet the eligibility criteria or need a larger loan, banks or financial institutions may ask you to get a co-signer/guarantor (usually a parent or guardian) with a good credit history.
The borrower must check the additional cost that may be applicable. Additionally, he must research and choose a lender with a history of serving international students so that the entire loan process remains hassle-free.
(The writer is CEO, Bankbazaar.com)