The frequency of Indian students opting to study abroad is growing exponentially every year. Many students apply for education loans to pursue education abroad. Getting an education loan for study abroad is not that tough as compared to managing and using it. A student loan, if not managed well, can lead to debt-traps and penal action as well. Here we provide you information about general methods and trade secrets of using a student loan to serve your academic interests in the best possible manner. This article acquaints you with necessary knowledge of maximizing your education loan benefits to cover all your academic expenses abroad.
Benefits of Education Loan for Study Abroad:
Lowest Interest Rates Internationally
Indian banks provide economical education loan interest rates as compared to their international counterparts
Government Aid for Study Abroad
Study abroad education loan interest payments are subsidised by the Indian Government for certain applicant categories
Admission Assistance by Loan
Student loans cover expenses like VISA application, health-insurance and travel expenses, which are necessary for admission to some institutions
Economic Convenience: Option for Collaterals
Student loans for abroad can be taken against various collaterals (like deposits, securities, movable assets); a privilege that is generally not rendered to domestic loans
But, no matter how you want to pursue your education abroad, the major concern remains; ‘how to manage the cost of education there?’ International Scholarships and Education Loan for Study Abroad are the most effective answers to these concerns. Still, most scholarships are not free-rides and students have to pay remainders from their pocket. Education loans help students to overcome this hurdle.
Also read ‘Education Loan: All You Need to Know‘, to find more details about education loan schemes in India, their eligibility criteria and interest rates.
Education Loan Management
The first step towards using one’s education loan for study abroad is to manage its allocation and plan its repayment. Here are the steps to manage student loans in an organized manner.
Education loan saving
- Outward remittances are a portion of your student loan amount itself provided for pocket expenses
- Use this sum to save a portion for education loan EMIs
- Even the smallest portion of this petty expense serves a great deal of relief while closing the loan
Part-payment and foreclosure of education loan for studies abroad
- Foreclosure of education loan for study abroad: closing the education loan before tenure deadline by depositing a lump-sum amount equivalent to pending loan amount
- Part-payment of international student loan: paying a consolidated sum of amounts more than EMIs to repay education loan earlier
- Both these methods help in reducing the interest accumulated on loan and make the education loan less of an economic burden
Variable Education Loans vs. Fixed Education Loans
- Education loans for study abroad have two interest rate based categories: MCLR (Marginal Cost of Fund based Lending) rates based and fixed interest rate loans
- MCLR based loans can face an increase in interest rate every 6 months. If analysed closely, it eventually ends up adding at least 0.5%-1.0% extra in your interest rate throughout the loan tenure
- If you have multiple loans from various sources to cover your complete education, repay the MCLR based loans first
- Variable loans paid early keep your expenses in check
- Keep repaying some extra sum with each EMI
- Banks do not charge pre-payment fees for any amount lower than the equivalent on one EMI
- This means you can pay up to 1.9999999 times of your education loan EMI every time
- Use this to repay your loan early and manage your expenses
Also read “Education Loan for Study Abroad” for finding detailed information about loan schemes, extra benefits, norms and conditions for Foreign Education Loan.
Education Loan Usage: Tips and Tricks
The cost of education in countries such as the US, UK, Canada, and Australia is higher as compared to the cost of education in India. In this scenario, a scholarship or an education loan for study abroad can turn out to be a great help to students who really want to excel in their career. There are other methods to optimize your international education loan usage. Here is a list of all such tips to effectively use your education loan.
Use education loan for examination fees
Educational institutions abroad require students to clear entrance examinations to pursue higher education. Students appearing for SAT exams, and other examinations like LSATS, GRE, GMAT, IELTS, TOEFL etc., can pay the exam fees with education loans. There are scholarship examinations as well which help students to find options of education finance without loans. Pay for these exams by using education loans for study abroad and then repay the loans by using scholarships thus secured.
Did you know: There are interest rate subsidy schemes for study abroad education loans provided by the Indian Government. The Dr. Ambedkar Central Scheme of Interest Subsidy on Education Loan for Overseas Studies of OBC and EBC covers interest paid during education for OBC & EBC Students. The “Padho Pardesh Interest Subsidy on Education Loan for Overseas Studies for Minorities” covers interest paid by minority category students for international education. Find more about these schemes and other scholarships at Buddy4Study.
Adjust scholarships with education loans
Scholarships can be used to cover education loan EMIs. Various scholarships especially allow provisions for paying EMIs by using scholarship fund. There are education loans for study abroad schemes as well, which allow margin payment by scholarship sum. This means that applicants’ contribution towards each education loan disbursement can be adjusted with scholarships to make studies truly cashless. International scholarships for Indian students even allow advance disbursal to set-off loan payments. Use your merit and academic might to cover loan economics.
Refinance your education loan for study abroad
Though it’s not a highly recommended step, education loan refinance can help students use a separate education loan to repay an impending education loan which has accumulated huge interests. Students can use their loans from other banks and in some cases from the same bank as well; to refinance their education loan. This helps them in cutting down the interest surmounted on their loan and moving towards an organized re-payment plan.
Get insurance to cover your education loan for studies abroad
Students can also opt for education loan insurance provided by many banking institutions across the nation. Education loan insurance helps students to cover emergency cases when they are unable to repay the education loan. Accidental incidences like the death of co-applicant, or loan repaying applicant; or bankruptcy can be marginalized with such insurance schemes. Use your loan to pay the premium for the insurance and stay secured.
Once you are aware of everything about education loans, you can pursue your dream career abroad of your choice without any financial constraint.
Since the education loan covers most of your expenses abroad, you just need to carry all your belonging with you to pursue your aspirations. Having said that, it is advisable for you to make prior arrangements before taking off to a new destination. With the information stated above, we assure you that you’re all set to get an international learning experience. Happy Learning!