Pros and Cons of Studying Abroad for Student Loans

Studying abroad opens doors to incredible opportunities, but the financial aspects can pose challenges. In this comprehensive guide, we'll explore the pros, cons, and alternatives of utilizing student loans for international education.

Students Should Know Before Applying for a Student Loan

Student loans for studying abroad are the most important thing for students who do not have enough money. The loan amount raised can be repaid to the lender on agreed-upon terms after the agreed-upon duration. Students can enroll in undergraduate, graduate, or other professional study programs at a university in another country. Students can use the borrowed loan to pay tuition and cover living expenses while studying abroad. 

Types of Student Loans

• Secured or collateral loans
• Unsecured or without collateral loans

Lender Types for Study Abroad

• The Indian Lenders

Indian lenders are well-known for offering higher education loans to qualified applicants. Potential lenders include public and private sector banks, as well as non-bank financial companies (NBFCs). These Indian lenders follow the rules and regulations established by the Government of India and the Indian Central Bank.
These are known to provide both secured and unsecured education loans for only overseas education. Borrowers benefit from this service by receiving interest rate discounts and other benefits. Students can reach Private Banks like HDFC Bank, ICICI Bank, AXIS Bank, Federal Banks etc. or Public banks like Bank of Baroda, State Bank of India, Bank of Maharashtra, Union Bank of India etc. to get educational loan for studying abroad.

In India, education loans are available to students seeking admission to almost all colleges, and universities that have been approved by the All India Council for Technical Education (AICTE), the University Grants Commission (UGC), and the Indian Medical Council (IMC).

• The International Lenders 

Students can also apply for educational loans from international loan providers, however, students should be aware that these loans are only available for higher education abroad. These loan providers make a loan available after the student completes the necessary paperwork. Students planning to enroll in job-oriented graduate and post-graduate programs such as MS, MCA, MBA, and study programs facilitated by CIMA – London, CPA – USA can also benefit from low-interest rate education loans from international lenders.

•  Education Loan Amount

While raising funds for education, students should be aware of everything. It will assist in making better study abroad plans. In general, the amount of money a student can apply for load is determined by tuition and study abroad expenses. Students can borrow up to Rs.75 to 80 lakhs in educational loans to fund their education abroad. The loan amount may differ depending on the lender or bank chosen. The loan can also be obtained through NBFCs. Banks cover approximately 85-90% of study abroad expenses, whereas NBFCs cover 100% of expenses.

The Pros to Student Loans for Studying Abroad

• Concession or discounts on interest
• Easy online application
• Easy Repayment in EMIs
• Minimum documentation
• Quick and Easy Processing
• Helps in Visa Approval as it acts as evidence of funds while securing a student visa 

• Lower Rate

International banks charge a relatively low interest rate on education loans. Subject to certain conditions, it can help you save up to 3% in annual interest. As a result, students can benefit from lower interest rates on student Educational Loans.

• Cover Essentials Expenses

Aside from tuition, room, and board, student loans can cover a variety of other study expenses. A student loan for studying abroad is an excellent choice for funding educational necessities such as laptops or computers, books, and other related expenses. In this case, students do not have to pay for necessities with money raised from other sources.

• Get Secure and Unsecured Loans

There are two types of education loans available: secured and unsecured loans. A secured loan from a bank requires the borrower to submit collateral. Some banks do offer students interest rate breaks. On the other hand, NBFCs are available for an unsecured education loan for specific courses, with amounts ranging from up to 65 lakhs in some cases and depending on which country the student chooses.

The Cons Related to Student Loans for Abroad Study

Because of the complex documentation procedures, it may be difficult for students to obtain loans in many cases. In some cases, the student may be required to keep the property papers as collateral for the education loan. Bankers or lenders request collateral to reduce the risk of payment default and student non-payment.

• Loan Available for Limited Programs Only

We will talk about limited opportunity education loans in this section. Some lenders process unsecured loans in which no assets, property papers, or other collateral are required. This loan is only available for a limited number of courses, and students must make a compromise with the university and course in this case.

• Education Loans with No Security

Many international loan providers offer unsecured study loans after a credit check and income verification based on eligibility criteria. It is not available to every aspirant. This loan requires students to have a good background or a clear credit history with no payment defaults. Students are sometimes unsure about the university where they want to study abroad and their decision to study abroad.

• International Loan Providers Require a Guarantor

If students take international loans for overseas education, co-applicants play an important role in their careers. In that case, lenders require the co-applicant or any guarantor to be located in the country where students wish to begin their studies abroad. However, many students are unable to do so. Most students find it difficult to present a guarantor with a green card or overseas citizenship. This loan option is known as unsecured loan service, and students who do not have a guarantor are unable to use it.

Alternatives to Avoid Student/Education Loans for Study Abroad 

Alternative loan facilities make studying easier after borrowing money from lenders, and students are not required to show the reason for their higher education.There are a few alternatives that can help students avoid taking out a student loan to cover the costs of studying abroad.

• Avail Property Loan with No Purpose – This loan is called a loan against the property. This loan is an easier solution to a start study abroad without mentioning the purpose of the loan. Loan providers accept property like a flat or land as collateral. Student’s parents will take this load for their children without revealing any reason for the loan, like academic records, co-applicants abroad, etc.
• Go for The Gold Loan at Lower Rates – The gold loan is a traditional part of Indian banks, and they keep their gold in the bank to take a gold loan at a lower interest rate. If students have a good quantity of gold, then they are eligible to take a higher amount from the bank and non-banking financial companies offering loans against gold. Students would have a good cost of as 50% to 70% of the gold value within 24 hours. Students can use this amount for study abroad purposes.
• Scholarships - full or partial scholarships
• Self-financing – using the family saving and assets

In conclusion, navigating the landscape of international education financing requires careful consideration, and understanding the nuances of student loans is paramount. As you stand at the threshold of your academic journey, armed with insights into the pros, cons, and alternative avenues for funding your studies abroad, a world of possibilities unfolds.