Clarifying doubts on Overseas Education Loans

Overseas Education is gaining momentum and is becoming an increasingly popular choice, even among middle and lower-middle class families. This rise is because parents and students have realized that education from a highly reputed foreign university would play a major role in the betterment of the student's career. Thus, nationalized banks, private banks, and NBFCs (Non-banking Financial Companies) are rolling out attractive packages and schemes for education loans.

This is a very significant fact to keep in mind as getting an Overseas Education Loan is no longer as tedious as it was a decade ago. Despite such advances in the Student loan sector, parents and students have a lot of misconceptions about the loan process. We have made an attempt to clarify some of the most frequently occurring doubts.

The process is extremely time consuming and complex

This is the most common misconception regarding education loans and one which makes parents very apprehensive. They feel that despite everything, approval of the loan would take months and would involve complexities and legal formalities that they won't be able to cope up with.

However, this is not what it takes nowadays. The entire process has been streamlined to ensure customer ease and satisfaction and the number of formalities that are involved are minimal. Online verification and newer technologies introduced in the sector have greatly simplified the approval and disbursement process. Provided that you have all the essential documents, the sanction of the loan is a simple matter that is completed within a few days.

Without collateral, I won't be eligible to get a loan

Loans for which collateral is needed as security against defaulting on the loan amount, are known as secured loans. However, if you do not own something that qualifies as collateral, you have an option for unsecured loans. These loans are granted on the basis of your credit score and loan repayment history.

You might ask why institutions grant such loans which don't have security? The answer is because they can earn more on such loans. Unsecured loans charge a higher rate of interest than the secured loans. But, in case you do not own a property or any asset worth of granting you a secured loan, the option of an unsecured loan becomes your lifesaver.

Repayment of the loan would place a huge financial burden

Repayment is not as high a concern as most parents make it out to be. There are various Funding Options for Overseas Education Loan repayment. Firstly, in most of the countries, the student is eligible to work part-time and earns significantly enough to ease the financial burden a little. Secondly, getting a degree from a reputed foreign university would lead to a high-paying job, which would make repayment an easy task.

100% amount required is never disbursed in the loan

This is again an assumption that parents make. True, some nationalized banks provide 80% of the required amount but this is not the case with all financial institutions. Many banks/private institutions do provide a 100% disbursement towards payment of education fee and living expenses. This benefits the parents a lot while financing their child's overseas education journey.

If I have poor academics, I won't get an education loan

Financial institutions do look at academics while sanctioning loans, however, provided that you have an offer from a decent foreign university and a guarantor on your behalf, past academics play minor to no role as far as sanctioning the loan is concerned. Processing the loan application for candidates with different past academics is done on more-or-less similar scale.

Entrance tests and qualifying exam scores play no role in the sanction process

Scores for university entrance exams and tests like GRE do play a major role during sanction. Students with a high GRE score have been known to have received one-day loan sanctions. Negotiation on interest rates is also sometimes possible for high scorers.

Having clarified these misconceptions, parents might find it a lot easier to think about getting overseas education loans for their children. However, for detailed guidance on the entire process, an Education Loan Advisor would be of immense help to the parents and students. The advisor deals with country-specific cases and has a thorough knowledge of the nuances involved, from application to sanction.