HOW TO GET A STUDENT LOAN

student loan

Education these days – particularly higher education – is an expensive prospect with little or no guarantee with respect to ROI.

Students along with their parents struggle to fund higher studies and there are many who give up simply because of lack of resources. One way of funding higher education is to take out a student loan so here’s all you need to know about how to get a student loan.

Try not to borrow

Remember that you must repay whatever you borrow. So the best thing is not to borrow at all – neither from friends and relatives nor private or public sector lenders like banks. But don’t give up your education either simply because you cannot fund it. You can ]fund a part of it yourself and borrow the excess.

Pay your way through college

Here’s how you can do that:

  • Working part time – there are plenty of WFH opportunities for you.
  • Sign up for an employment contract that agrees to pay for your education in exchange for a certain minimum years of service.
  • Find a scholarship.
  • Choose a less popular but also less expensive institution from where to study.
  • Apply for Government Grants

What are your options for getting a student loan?

Broadly, there are 2 types of student loans – or education loan as it is also called. Government Loans or Private loans. Here’s a snapshot of both:

  • Government Programs – Governments run programs for students that include loans for study within the country as well as sin a foreign country. There are other ways in which governments can help – such as grants.
  • Loans from Private institutions – Students usually go this route if a government loan or program is not feasible for some reason or they have maxed out in that area.

Other non-conventional sources of loan include:

  • Loans from friends or family
  • Home equity loans
  • Loan against insurance policy
  • Unsecured loans
  • Overdraft or credit cards
  • Income Sharing Agreements

It is advisable to take loans from reputed institutions even if the interest is higher or you have to put up collateral. This is because these institutions have a clearly established procedure and there is lesser chance of fraud or running into trouble later.

Who is Eligible for education loan in India?

Although eligibility is different for different institutions some of the more common criteria for education loans in India include:

  • You should be a resident of India (or the country where you are applying for a loan)
  • You must be more than 18 years of age and eligible to enter into contract.
  • You should have secured admission to a course in a reputed institution. Note here that some loan providers may have a list of approved institutions – particularly if you want to study abroad.
  • In case you are a non-resident Indian you should be holding a valid Indian passport.

Here’s a list of documents required to obtain loan

  • Aadhar or Social Security Card
  • PAN card of the borrower
  • Proof of credibility – such as bank account statements or tax returns
  • Proof of admission – or application – to a reputed college

Some institutions may ask for more documentation.

Finally here are some useful loan-terms you should know

  1. Collateral – an asset or property that you transfer to the lender as security against non-repayment of loan.
  2. Co-Signer – Someone who signs the loan agreement with you making him equally responsible for repayment.
  3. Early Repayment Penalty – Charges levied to compensate lenders for expected earnings through interest in case you decide to repay the loan before time. These charges are usually not levied in the initial or concluding months of the loan.
  4. Fees – Additional charges attached to your loan to pay for administration, processing and other expenses.
  5. Moratorium – A period of grace when no EMI is payable. Typically this is a six month period after completion of your course to give you time for loan-repayment. Interest is still applied during this period and must be paid.
  6. Sanction Letter – A letter from the lender informing you about the grant of loan. It is an important document required if you are applying for study visa.
  7. Loan Tenure – Also called loan duration or loan term it is the time you choose over which you will repay your loan. Longer term usually means lower interest but you may end up paying more in the long term.
  8. Margin Money – Some lenders demand a certain amount as upfront payment while the loan covers the remaining cost. Such lenders may ask you to pay them the upfront amount – called margin money – which will then be transferred back to you as part of the loan. You should watch out for fraudsters who may take your margin money and never return it.
  9. EMI – Equitable Monthly Instalment is the amount you pay every month as part repayment of your loan. This amount is determined as a computation of the loan amount, interest, and term along with any applicable fees and charges.
  10. Floating Interest – Also called variable interest is an interest rate that changes along with market changes. Loans are usually granted at a fixed rate of interest taking into account possible inflation or deflation. Some lenders allow you to take advantage of lower market rates by applying a variable interest rate. You should remember however that when market rates rise, so will your loan interests. Remember also that your EMI may change with changing rates.
  11. APR – Annual Percentage Rate is a percentage of your interest rate and all fees and charges applicable to your loan. Most lenders apply APR instead of actual interest to cover all expenses and do not charge any fees for loan processing. You should ask about APR when inquiring about your student loan.
  12. Secured and Unsecured loans – Secured loans are those that demand a collateral while unsecured loans require no collateral. Loan amounts are usually lower for unsecured loans as compared to secured loans. Interest rates and terms too will vary depending upon whether the loan is secured or unsecured.

This just about sums up the basic information you need to get a student loan to study abroad – or even within your own country. You should carefully check the terms of the loan before you sign the agreement.

If you need more information feel free to read our blog on HOW TO GET A STUDENT LOAN on WWW.BLOGYOURNICHES.COM.

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