Answering Questions on Foreign Education Loansby Rita Biswas Consultant
With an increasing number of students going for overseas education, the demand for education loans to finance studies abroad is on the rise. More often than not, the fees and living expenses in a foreign country are way more than that in India and overseas education loans become a necessity. However, parents and students are often not clear when it comes to the details of the overseas education loan process and the things that need to be looked into. Also, they have a lot of misconceptions about the financial institutions and the repayment process. Herein, we have tried to answer some important questions that are asked by the borrowers and which are designed to help future borrowers:
Q. Are foreign education loans granted to everyone?
A. No. Despite a huge number of candidates applying for an Education Loan For Abroad Studies, not all the applications are accepted. There are cases in which the foreign education loan is rejected.
Q. Why are some of the foreign education loans rejected?
A. The grant or refusal of a foreign education loan depends on the candidate’s profile. The financial institution has certain criteria on the basis of which it judges whether or not the candidate’s profile qualifies for the loan or not. The following criteria are considered for assessment of a candidate’s profile:
1. Profile of the Institution in which the student wishes to study
2. Type of program undertaken
3. Previous academics/ number of backlogs and any academic gap in the student’s profile.
4. Property Documents
5. Parent’s/guarantor’s income
6. Student’s, Parents’ and Guarantor’s CIBIL Score
If the student/guarantor is found deficient in one or more of the critical factors, the application is liable to be rejected. These factors are considered to ensure that post-education, the student is able to find suitable employment and repay the loan amount after the moratorium period.
Q. What is the CIBIL Score?
A. The Credit Information Bureau (India) Limited (CIBIL) keeps track of the credit history of individuals and businesses and produces a 3-digit numeric score (the CIBIL score) ranging from 300 to 900. Based on your repayment history of previous loans, you can have a score near to 900 if you have a better credit rating. A score above 700 is considered good. This CIBIL score is taken into account by financial institutions before granting the loan.
Q. Is collateral always necessary for getting a foreign education loan?
A. No, not necessarily. There are two main Funding Options for Loan, the secured and unsecured overseas education loans. Financial institutions, mostly private banks, and NBFCs also grant loans without collateral, known as Unsecured loans. However, these loans are granted for lower amounts and at higher interest rates.
Q. Are there any special considerations that I need to keep in mind before applying for foreign education loans?
A. Yes. There is a specific country-wise requirement that you need to understand before you opt for a financial institution. Countries like the UK, Australia, and New Zealand take into account the financial institution granting loans, for the visa process. Unsecured loans from private banks and NBFCs are not accepted by these countries and visa applications of candidates who have opted for such loans are liable to be rejected. Hence, candidates applying for these countries are advised to approach nationalized banks for loans.
Q. What is the importance of pre-visa disbursal? Do all banks disburse the amount before visa?
A. It is of paramount importance for the student to check the country-specific visa requirements especially regarding pre-visa disbursal.
Some country-specific requirements are stated below.
Tuition fee Disbursal: Every universities is asking for tuition fee deposit to block the seat before student apply for student visa. As per the rules the tuition fee has to be disbursed from Education loan account only and most of the banks refuse to disburse the same.
Living Expenses Disbursal rules for few of the following countries:
New Zealand: One year Living expenses to be transferred in FTS account from loan account before visa.
Canada: One year Living expenses to be transferred in GIC account from loan account before visa.
Australia: One year Living expenses to be transferred in Saving account from loan account before visa.
Germany: One year Living expenses to be transferred in Blocked account from loan account before visa.
Sweden: One year Living expenses to be transferred in Saving account from loan account before visa.
So, it must be ensured that the bank to which the student is applying for loan disburses the fee and living expense amount before visa. An Education Loan Adviser takes care of all such country-specific requirements such as pre-visa disbursal process.
We hope that these answers may have cleared your own doubts regarding abroad-education loans. For specific and country-wise counseling, an expert Education Loan Advisor may be approached who is sure to take care of all the issues that may be faced by the student.
Created on Apr 18th 2019 01:00. Viewed 232 times.