Increasing numbers of Indian students are looking to study abroad, driven by the prevalence of high-quality schools around the world. But an overseas education can be extremely costly without the assistance of a loan or scholarship. With so many options to choose from, how can students find the best loan provider for them?
The most obvious factor that students look at is the interest rate, but they should really pay more attention to the APR. APR, or annual percentage rate, is a legally mandated calculation that reflects the interest rate and other costs associated with the loan. While an important metric to consider, leaders can still charge fees that escape the APR calculation, such as prepayment fees and the requirement to purchase life insurance. Therefore, it is important to not blindly rely on the APR either.
Students should additionally consider whether the interest rate is fixed or floating. More lenders promote a floating-rate loan, or variable-rate loan, where the interest rate can change based on reference rates and economic trends. This means that rates today can be very different from rates in the future, and students bear the risk that monthly payments may rise over the life of the loan. More budget-conscious students may, therefore, prefer a fixed-rate loan that does not vary over time.
Prudent students consider which currency their loan is in. Though students from India may believe that a rupee-denominated loan sounds appealing if the currency depreciates, such depreciation is not guaranteed and may instead impose costs on students. For example, a significant rupee depreciation may result in the original loan being insufficient to cover education expenses. Additionally, students who decide to remain abroad after graduation may prefer the stability and predictability of loan payments that are in the same currency as their earnings.
Such students may also prefer a lender that is based in the same country as their school. Lenders located in the U.S. or Canada, for example, may be more familiar with necessary visa and study permit requirements, and may be able to cover a wider variety of schools, expenses, and fields of study. Additionally, such lenders can help students to establish a credit profile in the U.S. or Canada, which can be tremendously helpful to those seeking a job or to rent a flat after graduation. Starting and building a credit profile while studying abroad is essential for positioning one’s self for success after graduation – not only to get access to other financials services, but to the job market.
Many lenders require students to pledge collateral, or have guarantors, co-signers, co-applicants, co-borrowers, or other forms of security. Such practices risk imposing a financial burden on the student’s family. So it is important for students to weigh their preference for financial independence when deciding which lenders to work with.
Additional student support
Some lenders offer various means of supporting students with their education, such as by providing scholarships, flexible payment options, forbearance, immigration support, and career readiness preparation. Such financial and professional resources help ensure that students are cared for and that they feel confident in their future.
Overseas education can be a personal and professional game-changer. A foreign education can offer students an intellectual challenge as well as transform them into world-leaders, comfortable operating in a cross-cultural professional and social environment. Picking the right student loan provider will help ensure students succeed in all their endeavours.
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