Overview
Millions of Indian students head to foreign universities to study every year. Recent data from the Ministry of External Affairs reveals that the number of students going abroad has increased even after the COVID-19 pandemic began. As of March 2022, more than 1.33 lakh students went to pursue their studies abroad, mostly to the United States, Canada, and the United Kingdom. RedSeer, a management consulting firm, estimates that nearly 1.8 million Indian students will seek higher education opportunities abroad in 2024, and they are likely to spend $80 billion annually.
In 2023, the costs of studying abroad amounted to $16,000 per semester. Due to the high tuition fees and other living expenses, many students turn to education loans to fund their higher education dreams. However, it is not as simple as it seems to get approval for a student loan due to the variety of factors that lenders take into consideration before approving loans.
Before we understand the factors involved in getting education loans approved, let's see what are the advantages of availing of one.
Benefits of an education loan to study abroad
Education loans provide multiple benefits:
Financial burden reduces as the tuition fees are easily paid via the education loan.
An education loan can also be extended to cover the expenses of study materials, stay expenses and any other collateral education fees charged by the university.
Education loan provides tax relief while making the repayment.
Students can complete their education without financial worries.
Now that one understands how it is beneficial to avail of an education loan, let’s look at 6 ways in which the education loan process can be made smoother to study abroad.
6 Ways to make the education loan process easier to study abroad
Is studying abroad the right decision?
If meeting new people and visiting new places without being homesick is something one can handle, then one can easily study abroad. Also, one should consider if one can manage living expenses after getting a loan or scholarship.
One should also consider if it is necessary to pursue the desired course from a foreign university or if it can be pursued from a premier Indian university as well.
If one finds that studying abroad has more advantages than studying in India based on one's choice of course and employment prospects, one can move ahead and determine the next steps.
Understanding the education loan process
Before applying for a loan, one must check the preapproval and loan prequalification processes. The loan process involves coordination between the student, the lender and the university wherein the student wishes to get admission.
The loan prequalification process involves submitting the KYC documents, previous years' income tax returns of parents, previous loan servicing documents and details, prevailing credit scores, academic details of the student, exam scores and other documents like visa application and collateral proofs.
The process for a loan should start the moment the student gets the admission letter or conditional permission to study abroad. Other documents required are immovable property documents and liquid assets as applicable.
If the documents are in place, the loan application process becomes much easier. As a result, one gets conditional approval of a loan letter which can be used as proof of funds while applying for a visa at international immigration offices.
Researching schools and lenders
One of the most important steps in getting a loan is the reputation of the institution. If the institution is reputable, the loan process and preapproval become easier.
Also, some of these institutions and lenders (other than banks) have tie-ups with each other. Thus, getting a loan sanctioned to study abroad becomes very simple.
While researching institutions with multiple loan options, one should also check whether they have a proper studying environment, internship opportunities, campus recruitment programmes and employment prospects.
Research an institute not just based on budget and credit score in hand but also on the overall value of a degree. In many cases, students opt for a university that fits their budget but has a low reputation. Due to this, lenders are wary of sanctioning loans. Should the institute have a good reputation, lenders may sanction loans with low-value collateral.
While looking for a lender, ensure that rates of interest, repayment schedules and terms and conditions are favourable and not rigid. Apart from banks, other lenders specialise in providing loans at competitive interest rates.
Scholarships
Many reputed universities and institutions offer scholarships and grants that cover a part of education expenses. One can explore these opportunities before or during the application of the loan process where part of the loan is financed through scholarships and grants. There are also zero per cent loan products provided by various organisations.
Documentation
To make the education loan process a smooth ride and get preapproval, one's documents must be in order.
Various documents concerning parents and students are required to ensure the bank that the loan would be serviced in time without any hiccups. The documents that are needed include identity proofs, address proofs, income tax returns of previous years, documents related to existing loans being serviced, details of movable and immovable properties, details of properties that are already pledged against existing loans and credit scores.
Student details required include test scores, admission details from the university abroad, and visa application details. This is not an exhaustive list and other documents may have to be produced if needed by the lender.
Ensuring a good credit score
Having a good credit score (670 and up) helps in making the education loan process much easier. It becomes simple to convince financial institutions to process the loan faster. However, to keep the credit score good, one needs to ensure that even the smallest of credit is paid well on time, including buy now pay later (BNPL) ones, and not a single lapse in the repayment of loans occurs.
Tips for a Smoother Process
One also needs to ensure that the lender or the bank has a good reputation concerning their past transactions.
Students must check the past transactions of the bank or lender before applying for a loan from them.
Every loan is subject to negotiation but certain loans provided by lenders who have tie-ups with reputed universities abroad provide fixed cover, interest and duration. Students must research the benefits of such loans before applying.
Students must apply to all shortlisted banks and financial institutions and the decision to finalise one of them should be based on the terms and conditions negotiated.
One must not hesitate in asking questions and ensuring that all questions are answered to one’s satisfaction and only then one should move ahead with the further process.
Conclusion
Many students apply for education loans to study abroad as it enables them to complete their education without any hassle. This facility combined with scholarships and help from charitable organisations and NGOs is paving the way for students from humbler backgrounds to go for an education abroad. Also, providing tax relief on repayment of education loans is encouraging a rise in applications and playing a huge role in driving the economy forward.
To make the process smooth, one must ensure that the university is reputed, documents are in order and one's credit score is good. If you are looking for an education loan with minimal collateral and a hassle-free online process, consider Tata Capital's education loan. With quick approval rates, competitive interest rates (starting at 10.99%) and minimal documentation, students can fulfil their ambitions to acquire a high-quality education abroad regardless of their financial background. To apply for a student loan with Tata Capital, one needs to submit one's mark sheet(s) and certificates, admission letter, documents for studying abroad and other identity proofs.
14 February 2024
7 mins read
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