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Student Loan Application Process complete guide

Student Loan Application Process

by Ankur Gupta

Student Loan Application process for study abroad is a crucial step in securing admission at an international institution. The inter-relation of Student VISA, Student Loans, and Admission processes make the student financing part a necessary evil for any study abroad aspirant. As much as 63% (approx.) of applications for a study abroad VISA to any country by Indian students get rejected (MHRD & U.S. Department of State). Most of these owe the loss to ineligible credit history, insufficient proof of funds or incomplete study loan documentation. Managing the language proficiency requirements and admission process is comparatively easier than managing student finances and VISA conditionsColleges Admissions, Study Abroad, Login with user details, find Courses, Exams, Scholarships

The key to getting over all the misery of Student VISA rejection is to have a strong financial background. And if you’re relying on a student loan for your study abroad aspirations then it becomes even necessary to get the student loan application process right from the beginning; to get your VISA without any hassle.

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Common questions like how to get private student loans for study abroad, how to refinance education loan, what is the step-by-step process of getting an international education loan requiring a deeper analysis of the complete financing process. Here we have provided the complete step-by-step guide to student loan application process, along with key identifiers like documents required, ease of arranging the documents and turn-around-time.

Student Loan Application Process-Step-By-Step Guide

Despite what the newspaper/media stories would have us believe, the student intake to foreign universities despite the international sanctions has risen. Students owing to the renewed banking norms of 2015 are able to apply for student loans easily and secure study abroad scholarships or their higher education.

Being pre-informed about ins-and-outs of student loans for studying abroad helps any student to make it through the process without the conventional office-trotting and documentation hassle. Here is a brief outline of what are the steps with which any Indian student applying for study abroad education loan should follow.

  1. Study Abroad Education Loan Budgeting
  2. Foreign Education Loan Eligibility confirmation
  3. Study Abroad Loan application
  4. Loan agreement and disbursement planning
  5. Education Loan Post-Application Management

ALSO READ: TOP INTERNATIONAL SCHOLARSHIPS FOR GRADUATE STUDENTS FROM INDIA

Student Loan Application-Step 1

Budgeting and Financial fact-check

Critical Documents required: Letter-pad and calculator
Processes involved: Asset evaluation and scholarship application
Ease of process (0-10, increasing ease): 8/10
Turn-around-time: 24 hours
The first and foremost process of applying for a student loan to study abroad is trying and not apply for one. Sounds confusing! Any student who wishes to study abroad for higher education should always try to consider any and all possibilities or reducing the final need for loan-based funding.

The steps to do accurate budgeting of education loan for study abroad are:-

  • Get complete information about the academic and non-academic expenses of your studies at the foreign college or university.
  • Search for scholarships provided by the university where you’re applying for admission.
  • Exhaust all the Bursary Financing Options, any diversity scholarships or, international federal student aids.
  • Make a calculated analysis of all the assets which can be used to dissolve/liquify/or sell to compensate for the expenses.
  • Calculate the actual loan value by comparing Education Loan for Study Abroad interest rates commonly known as APR (Annual Percentage Rate).
  • Finally, consult with an education loan expert or a study abroad education counselor.

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Student Loan Application-Step 2

Study Abroad Education Loan Eligibility Confirmation

Critical Documents required: Academic records, Financial Records, Admission Letter (conditional/confirmed), Personal identification documents
Processes involved: Loan Application
Ease of process (0-10, increasing ease): 9/10
Turn Around Time: 24 – 72 hours
Education Loans for Study Abroad come in versions of secured and unsecured loans. Secured Loans require collateral to be submitted against the loan taken, and unsecured loans require loan insurance against the funds provided. The student loan application is based on various eligibilities of financial, academic and organizational eligibility.

Education Loan myth-buster: International Student Financing Institutions provide Student loans to international applicants without collateral. The student needs to find a credit-worthy (someone with good credit record, CIBIL/Credit Score, income continuity) co-signer for the loan, who is also a resident of the country were the student is applying for studies. There are more education loan options which provide funds without a cosigner as well.

Steps for confirming your student loan application eligibility are:-

  • Check if the approved university/college/institution list of the bank and find your prospect institution there.
  • If it’s not there don’t worry the loan shall be processed (at a higher interest rate obviously) if your application is credit-worthy.
  • Check the list of eligible courses from the banking institutions list to find your prospect course there.
  • Get a student acceptance confirmation (conditional admission offer) from your institution’s admission office.
  • Check the collateral value of your assets and the required documents for their validation as requested by the bank.

As an outcome of this process, you’ll be able to start with the formal loan application process which would, in turn, commence the asset validation process and other major documentation. Starting this step as early as possible helps in the series of obtaining necessary sanctions from both college/university and immigration authorities.

READ MORE ABOUT: TOP CANADA SCHOLARSHIPS FOR INDIAN STUDENTS

Student Loan Application-Step 3

Application of International Student Loan

Critical Documents required: Loan Application form, Cosigner consent, Collateral Documents, Admission Conditional Offer, VISA Application Proofs, Third party guarantee (if any), Language proficiency scorecards (IELTS, TOEFL, HSK) and International graduate admissions exam scores (GMAT, SAT, GRE, LSAT, etc.)
Processes involved: Loan Application
Ease of process (0-10, increasing ease): 9/10
Turn Around Time: 4-5 Days
Students obviously start with the education loan application process after they get a conditional offer of admission from the respective foreign institution/college/university. But it’s always wise to start the process when one applies to these institutions. Confidence in your application will help you start the loan process earlier.

There are three institutions where you can approach to get a student loan. Secured Loan institutions (Government and Private Indian Banks), Unsecured Loan institutions (NBFCs Non-Banking Financial Corporations) and International Private Student Loan institutions (Buddy4Study Edu Loans, Mpower Financing, Prodigy Finance, etc.)

The application process for each one of them is more or less the same with some deviations. The standard loan application process has been mentioned below:-

  1. Statement of Student Loan application interest: Submission of education loan for study abroad application form, personal documents, financial and academic documents
  2. Approval of Loan: based on credit history, post-qualification repayment capacity, collateral strength and bank policies
  3. Negotiation of Interest Rate and Additional Charges: reduction/discount on interest rate (APR, fluctuating or fixed) mark-up charges like ‘Origination fees’, ‘Processing Fees’, ‘Forex Charges’, ‘Deed Writing Charges’, etc.
  4. Confirmation and issue of Loan Conditional Offer: to be presented for immigration and VISA offices as proof of funds and the academic institution for unconditional offer of admission
    1. I-20 Form (US, Certificate of Eligibility for Nonimmigrant (F-1) Student Status-For Academic and Language Students) or CAS (UK and some EU countries, Confirmation of Acceptance for Studies).
    2. Or any other equivalent valid confirmation from your academic institution stating that you have been deemed acceptable or sponsored by the institution for immigration protocolsStudy Abroad College Admissions Login

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Deviations of Student Loan Application Process

Apart from the standard application process students might need to comply with some special requirements as per the lending institutions. Here is the brief explanation of the special steps that you might need to follow for the study abroad loan application with different lenders.

Secured Loans (Govt. and Private Accredited Banks) Unsecured Loans (Non Banking Financial Institutions) International Private Student Loans
Inspection fees payment: Fees paid against inspection of assets submitted for student loan sanction. Sometimes loan rejected after such payments and verification, for lack of credit-worthiness Education Loan Insurance: required (mandatory for some) to compensate for loan default in case of any natural or sudden mishap with the loan applicant Cosigner based loans: Students need to find a resident cosigner from the aspired country of education for their study abroad loan guarantee
Multi-City Loan processing: Coordination between bank branches if loan co-applicant, applicant, collateral property, cosigner are in different cities. Generally managed well with the online process for Unsecured and International Private Loans as compared to Secured Loans. Margin payment: payment of upfront margin money for starting the loan disbursal after admission confirmation and loan agreement Student loans without cosigner: Limited amount loans at comparatively higher risk and interest rate. Need to be applied separately after additional review of loan worthiness. Applied through education loan for study abroad experts and agencies.

TO FIND MORE DETAILS ABOUT STUDENT LOAN INTEREST RATES AND AMOUNT LIMITS READ: HDFC EDUCATION LOAN FOR ABROAD

Student Loan Application-Step 4

Student Loan Agreement to Disbursal

Critical Documents required: Academic fees demand letter, VISA sanction and approval certificate, Unconditional Admission Letter, Loan Agreement
Processes involved: Admission Confirmation, VISA Confirmation, Loan Agreement Signing/Counter-signing, Loan Disbursal Planning, Margin and Insurance Payment
Ease of process (0-10, increasing ease): 7.5/10
Turn Around Time: 15-20 Days
The Education Loan for Study Abroad application process is something that’s least guided by the loan lending institution and the applicant. The intervention of immigration institutions and admission offices of the institution make this process prolonged. However, this stage of student loan application process is easiest to pass through. Students basically have to collect various approval letters from institutions and submit them to authorities as per their requests.

The Steps of Loan agreement and disbursal planning are:-

  1. Loan agreement settlement: Signing of Loan agreement, collateral/lien deed, counter-signing by co-applicant/cosigner of loan and issuance of Loan agreement
  2. Obtaining Unconditional Admission Letter: Most international institutions provide a confirmed admission on submission of loan agreement.
  3. Closure of Student VISA processes: Submission of Loan Agreement as proof of funds, scholarship certificates, and unconditional admission letter for final VISA award.
  4. Coordination between Academic Institution and Student Loan Lender: Submission of Fees Calendar, the decision of EMI value, submission of ECS mandates for EMI transfer and coordination with Forex departments of loan lending authority
  5. Loan repayment counseling: provided by some lenders and foreign education loan providing banks to ensure that students know their responsibility towards repayment of the loan

OTHERS HAVE ALSO READ: TOP BANKS OFFERING EDUCATION LOANS, TO FIND LATEST MCLR, APR AND LIBOR RATES FOR STUDENT LOANS

Case Study Education Loan for Study Abroad Disbursal and Repayment: Education Loan amount of ₹20,00,000 at the rate of 12.5% APR for 10 years (Case 1) compared to the same amount taken at 13.5% for 9 years (Case 2)

  • Monthly EMI: ₹29,275 (Case 1) vs. ₹32,084 (Case 2)
  • Total Final payout: ₹35,13,027 (Case 1) vs. ₹34,65,140 (Case 2)
  • Comparative savings of Case 2 vs. Case 1= ₹47,887
  • Outcome: One year less loan tenure at a higher interest rate is still better than a lower interest rate loan.

So plan your loan disbursal and repayment cautiously!!

Student Loan Application-Step 5

Student Loan Management and Closure

Critical Documents required: Education Loan Repayment Statements, Education Loan Agreement, Employment Proof and tax statements (in a foreign country, if applicable)
Processes involved: Student Loan Cosigner Management, Part-payment/Pre-payment of Study Abroad Education Loan, Education Loan Refinancing, International Education Loan Consolidation
Ease of process (0-10, increasing ease): 6/10
Turn Around Time: 24 hours to 72 hours (depending on the specific process)
To apply for an education loan for study abroad is a continuous process of loan management. Processes in managing private student loans for international students involve early payment options, if the applicants happens to arrange for the required funds. They may also consolidate their multiple study abroad loan under one umbrella. Refinancing is also another option if students are unable to repay the loan in the time despite a good credit history.

FIND MORE INFORMATION HERE: REFINANCING OF EDUCATION LOAN: ALL YOU NEED TO KNOW

Students who have aspirations to find jobs and develop a credit history in foreign countries can pursue formal jobs there under some conditions of regional labour and immigration offices. This helps them repay the loans directly in foreign currency without going through forex obligations. This also helps them to get rid of cosigner conditions, which might invite undue implications of student loan repayment process.  The steps involved in study abroad education loan management are:-

  • Education Loan Cosigner management: In case if students find themselves in position to be considered for removal or reassignment of student loan cosigner/co-applicant, they may do so. They might still require to:-
    • Present proofs of legal employment in the foreign nation
    • Tax records and credit history
    • Cosigner/co-applicant consent
  • Education Loan Refinancing: Generally done by two kinds of study abroad education loan applicants:-
    • Applicants with good student loan repayment history: to repay their current loan completely by taking another federal education loan or private loans for Indian students studying abroad at the reduced interest rate in return for their consistent loan repayment record
    • Applicants with inconsistent repayment history: To extend the loan tenure by repaying the current loan completely and preventing oneself from loan default penalty by taking another loan (generally at equivalent or higher rate of interest)
  • Education Loan Pre-payment or Part-Payment: Requires students to pay small prepayment charge (not mandatory for all lenders) for repayment of loan in whole before the stipulated loan tenure end. Or repayment of consolidated loan EMIs in bulk.
    • Requires one to go through loan agreement negotiation for reduction of tenure or reduction of EMI value
  • Education Loan Subsidy Application: helps students to save the interest amount paid with EMIs during the loan tenure or complete reimbursement of education loan

This marks the end of your student loan application process for study abroad. The next steps in managing your studies would be to find student work opportunities abroad to create more options for repaying your loan. This might also help you to develop a credit history abroad if you’re planning on gaining professional employment post-education in the foreign country of your studies. You can also go for teaching and research positions abroad which provide great benefits of professional and academic career development.

ALSO READ: STUDY IN AUSTRALIA: ALL YOU NEED TO KNOW

Scholarships vs. Education Loan: Which is better?

In time applicants are meant to realise that student loans are not going to be the most economical solution for covering all academic/non-academic expenses for study abroad. Though getting an education loan for study abroad is becoming easier, but when compared to the overall process to ‘get a scholarship for foreign education’ is even easier for passionate applicants. Given the nature of these programs which have now started to value the non-academic value of diversity recruitment like the financial crisis, minority status, extra-curricular achievements and aspirational value; scholarships for study abroad are no longer a merit-only affair.

Apart from this, Student Loan application process is only as successful as the proactiveness of the applicant. Study Abroad education loan experts and banking institutions merely ease the operational tangles of this process. It is the value of student that fetches them the required student financing to achieve a worthy international education. In the next series of our informative study abroad articles, we’re going to inform you about the benefits of self-funding vs. student loans and eligibility criteria of international loans. Apply for the largest international scholarship and exam fair to get more such information. We wish you good luck with your study abroad applications. Happy Learning!

MORE TO READ: EDUCATION LOAN FOR STUDY ABROAD-HOW TO APPLY?

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