One of the most complex problems might be taking out an education loan for overseas studies, primarily if exorbitant interest rates support it.
Therefore, your priority should be to look for solutions that allow for fewer EMI payments and a cheaper interest rate before approaching a study abroad education loan.
In this article, we’ll talk about how to compare and negotiate with lenders over the conditions of student loans for international study.
How to compare abroad education loans
You may compare your student loans for international study from several lenders based on the following criteria:
The rate of interest: ROI significantly impacts the overall sum you will have to pay back to the bank. Before you sign anything on the dotted line, examine the ROI since even a 1% change will significantly influence the amount of interest you pay overall. Additionally, students should determine if their ROI is fixed or floating.
Moratorium period: Most lenders provide a moratorium period during which the student is exempt from loan payments. Compare the terms of the moratorium period carefully because they vary from lender to loan.
Processing fee: Comparing the processing price is also a wise decision because a lender might impose a processing fee that ranges from 0% to 5% of the loan amount. Imagine obtaining a loan for INR 40 lakhs with a processing charge of 5% instead of INR 2 lakhs without a processing fee.
Penalty on prepayment: Another crucial comparison on our list is this one. On student loans, lenders impose prepayment penalties ranging from 2% to 4%. Knowing the prepayment fees can help students plan their repayments more effectively because many want to prepay their loan balance to prevent future interest costs.
Interest subsidy scheme: If the interest subsidy program covers the loans they are evaluating, students would also compare those loans.
Loan tenure: The total interest paid to the bank would grow with a longer loan term. So choosing a shorter loan term would be the better choice.
RBI Guidelines for Education Loans
How to negotiate the terms of abroad education loans from different lenders
The following advice can help you bargain for a lower interest rate on your student loan:
Build a strong profile: Your academic history and the institution you want to attend or decide to study at should be carefully considered if you are applying for higher education since they will significantly impact the interest rate.
Try to maintain an attractive profile so that banks will be prepared to offer cheap interest rates on loans since they are confident in your ability to pay the money back.
The major financial institutions for studying abroad consider your GPA, your GRE or GMAT score, your course of study, your level of study, your university, and the country where you will be enrolled.
Please do your research: Before requesting a reduction in the interest rate on your student loans abroad from the bank, it is sometimes preferable to complete your research.
Consider whether you can offer security or the income of your co-signer. You may also use factors like the length of your payback period to your advantage when negotiating interest rates with banks.
Additionally, it’s crucial to compare the interest rates offered by different banks and NBFCs and identify the lowest ones so that you may use their names to bargain with their rivals. There is a potential that you may prevail in the negotiation if your profile is impressive.
Apply early: Before earning admission to a college, it is always advised for students with strong GRE scores to apply for study abroad education loans from banks.
This benefits them by allowing them to evaluate other banks and provides them more time to bargain for a low-interest education loan from a foreign country. Applications for student loans abroad submitted at the last minute might have been a better option.
Calculate the expenses carefully: Because the loan size can significantly affect the processing fees, it is crucial to estimate your costs before making any final decisions.
You may also select an unsecured loan option if you correctly calculate your spending because they provide fewer loans.
Balance Transfer: Sometimes, it makes sense to switch banks for your school loan since, after refinancing, the bank you would be moving from could offer you a cheaper rate, which might save you money.
Additionally, you might need to transfer your mortgage in some circumstances, which could allow you to benefit from a cheaper interest rate.
Most people take out their first loan before making a living for educational purposes. The borrower’s credit history is significantly influenced by it. So, it is advisable to properly compare and negotiate the terms of your education loan
