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Gaming the loan system

Sudarshan Motwani |

Education in a reputed foreign university is a dream of many Indian students. If you plan your career and a degree fits into the scheme perfectly, then whether or not you have the means to fend for a course abroad. The experiences should stay with you — the cost however, must not. But it comes at a hefty sum and often delays graduating on time if not planned carefully.

With the rising cost of education, parents often find themselves in a predicament. While they aspire to give their children the best possible, the finances required deter them from embarking on this journey. In such a situation, they can choose to avail of personal loans; but these prove rather expensive because of hefty interest rates.

Indian parents are willing to shell out high for even an average US or UK university expense for undergraduate course. This cost could vary, for instance could be lower in Canada or Australia. On the other hand, typically a degree in a good American university can easily cost upwards of $ 50,000 or Rs 33.5 lakh a year.

At these times, student loans really come in handy as they ensure that no brilliant candidate suffers due to the lack of money. The number of students opting for higher education abroad has increased exponentially in the past two decades. Also, there is a drastic increase in the number of students opting for overseas education loan due to increase in the expenses of quality education abroad. Loans with reputed institutions can now be taken easily as long as proper documentation is adhered to.

Apart from the tuition fees, there are many other expenses that students abroad incur such as housing, meals, insurance and transportation to name a few. Today there are numerous lenders offering loans to students. Depreciation in Indian rupee and cost of education loan are only adding to the cost of education abroad therefore, parents are advised to do some serious financial planning. Foreign exchange is another vital aspect to consider while planning your expenses for education abroad.

Intensive research on interest rates and forex rates being provided by various banks, financial institutes and fintech startups is vital. Here is all that you must keep in mind before applying for a student loan:

Compare interest rates: Banks in India offer student loans for studies abroad at different interest rates. For example while ICICI banks offers a loan of up to Rs 20 lakh at an annual interest rate of 15 per cent, SBI offers an interest rate of 13.75 per cent for amounts between 4-7.5 lakh and 11.75 per cent for over Rs 7.5 lakh. However, there are different coverages under the loan that must also be considered, like inclusion of tuition fees, travel expenses, cost of hostel and cost of books etc. which are a part of the loan clauses. The loan that overall suits your requirement must be pursued.

Check for banks in liaison with your future institution for concessions: Certain universities abroad are recognised by some of the leading lenders in the country and have a student loan liaison with them. Always check this aspect before taking up the loan. You may also want to consider the fact that the loan amount that you apply for and may not really match the actual amount you receive owing to currency rate fluctuations. Therefore, for forex requirements, always choose a currency exchanger that hedges you from the market fluctuations by offering live rates.

Keep all documents ready: A loan is a complicated process and wherever money is involved, documentation will be involved. As you survey the banks for their loan process, also check on the list of documents needed for applying for a student loan for overseas education.

You will need a cosigner: Any student loan for a value over Rs5 lakh will require a cosigner. This is mostly a parent who will be a joint owner of the loan and will have to agree to pay the debt in case you are unable to pay back the loan on time. The cosigner will need to have a good credit record and will also need to submit certain documents for your loan to get through.

Check for repayment period clause: Most loans have a moratorium period after which you are needed to pay back the money through EMIs. Check this clause carefully as you need to arrange for the money to be paid back after the said duration and accordingly arrange for it or pick up a part time job.

Banks are extremely cautious while disbursing the loans owing to the bad loans that they have to suffer. So, keeping your papers in order may help you to speed up your process and take you a step closer to your dream of studying abroad.

The writer is chief exeucutive officer and co-founder, Bookmyforex.