5 things borrowers should know before applying for student loans

There are many challenges that could affect the loan approval of the students aspiring to go abroad and transfer of funds overseas if not handled well.

higher education, foreign education, studying abroad, education loan, inflation, loan processing, credit score, Omicron threat, Covid 19
Despite high rate of inflation, demand for higher education abroad is rising significantly and so is the demand for education loans.

The inflation in the education sector is much higher than the rate of price rise in many other sectors. Despite this, demand for higher education abroad is rising significantly and so is the demand for education loans.

“The number of Indian students applying for 2022 intake in foreign universities has nearly doubled. Increasingly, students in India are preferring to go abroad in search of better infrastructure facilities, access to a well-connected professional network, flexibility in the education system and a nurturing environment for entrepreneurship and innovation. However, most students will have to avail an education loan to avail these opportunities. There are many challenges that could affect their loan approval and transfer overseas if not handled well,” said Saurabh Jhalaria – Head of SME and Education Lending, InCred.

Jhalaria lists 5 key things that student borrowers should know before opting for an education loan –

Get your applications in place

Applications to foreign universities are surging each passing year. International student growth has outpaced domestic student growth by over 6 times in the last three years, reaching 7,70,000 in 2019. This number is expected to double by 2024, reaching 18 lakh students. Additionally, universities seem to be handing out scholarships a lot more liberally this year. In this scenario, its prudent to get your house in order so that you don’t miss out on an opportunity just because of procedural lapses. Begin your research well in advance and choose the most apt university, course and destination based on your budget. Ensure that you complete all the applications required well before time and submit the necessary documentation ahead of the deadline.

Loan processing could take time

Most students need to apply for an education loan to study abroad. With the jump in the number of student applicants, there could be a long wait for the approval for an education loan. Before sanctioning a student loan, banks will pre-inspect and verify the co-applicant, education institute, etc, which could lead to long turnaround times. Keeping a buffer of 1-2 months would be sensible here.

Maintain a good credit score

Generally, a parent or guardian is the co-applicant of an educational loan. It is imperative that the borrower has a good credit history to ensure that application is not denied. Even a long delay in paying off your credit card bill could impede chances of student loan approval.

Looming Omicron threat

Covid has reared its ugly head again, this time in the form of another variant, Omicron. Various countries across the world have begun imposing a lockdown and restricting international flights. This complicates matters for students who plan to apply for 2022 fall intake. If the situation gets grave, universities may be forced to go back to online mode of teaching. There isn’t much you can do at this point except keep updated with the latest developments of the country you’re planning to study.

Keep a check on interest rates

Currently, private and public sector lenders offer a multitude of loan options to students. Some loans don’t require collateral while others offer a reasonable interest rate. This could change if a third wave hits. Therefore, study each lender’s eligibility criteria and then apply for the option that works best for you.

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