Student Loan Application Guide to Study Abroad After 12th Grade

Student Loan Application Guide to Study Abroad

A student loan application can be your ticket to studying abroad to make the opportunity financially feasible. If you dream of pursuing a degree abroad, tuition fee ranges from INR 25 lakh to INR 40 lakh per year might be one of the biggest barriers in your way. These costs can seem too extreme to cover without support – but options like student loans can make them a lot easier to bear.

You can find the financial support you need by researching education loans for international studies. Once you submit your application and receive approval, you can focus on your studies without the burden of financial stress. Ready to turn your dream into reality? Let’s explore how student loans can help!

Why Consider a Student Loan to Study Abroad

Studying abroad can be expensive, with the cost of international education rising every year. Many students dream of studying in countries like the USA, UK, or Canada, but the financial demand of these opportunities is significant. One option to alleviate this burden is to consider international scholarships for Indian students after 12th grade. However, scholarships are finite in number and not everyone may succeed in scoring these financial awards. 

This is where student loans help. A student loan gives you the financial freedom to study abroad while maintaining your focus on academics.

Here are some reasons why a student loan application can help you study abroad:

⦁   Cover high tuition fees: Most universities overseas have higher tuition fee ranges for international students. A student loan helps pay for these without putting pressure on family finances.

⦁    Help with living expenses: Tuition is just one part of studying abroad. Rent, food, and daily expenses add up quickly when you are living overseas. With a student loan, you can manage these student finances easily.

⦁    Focus on studies, not money: Without financial stress, you can give your full attention to your studies. Knowing your student loan covers your costs, you won't have to preoccupy yourself with money matters.

⦁    Flexible repayment options: Many loans allow you to start paying back after you finish your course. This flexibility gives you time to find a job and settle into a routine before tackling about repayments.

⦁    Builds financial responsibility: Taking out a student loan teaches you how to manage money. It also necessitates that you plan and stick to repayments. These are important life skills for managing your future student finances.

Types of Student Loans for Studying Abroad

When filing a student loan application, you should learn about the different types of loans available. Understanding these loan types can help you choose the right option for your needs.

There are mainly two types of student loans: secured and unsecured loans. 

Secured loans require you to provide collateral. This could be property, a fixed deposit, or other assets. Because of the collateral, banks offer lower interest rates for secured loans. If you can provide collateral, this is often the cheaper option.

On the other hand, unsecured loans do not need collateral. However, they come with higher interest rates. These loans rely on the borrower’s creditworthiness or a co-signer's credit profile. This is a good option for those without property or other assets.

Under these two types of loans there are several student loan application options available for you: 

⦁    Government-backed loans: Government institutions offer this loan. They usually have lower interest rates and more flexible repayment options. For example, the Indian government provides loans through schemes like the Vidya Lakshmi portal.

⦁    Private bank loans: Banks like ICICI, SBI, or Axis Bank provide this loan. They may offer competitive rates but can have stricter eligibility criteria. Repayment terms may also be less flexible in comparison to government loans.

⦁    Financial institutions loans: Some financial institutions like HDFC Credila specialize in education loans. They focus on funding studies abroad. These lenders often offer more tailored options but may charge higher interest rates.

Country-Specific Student Loans

Each country has different requirements for student loan applications. In most cases, banks look at your university ranking, course type, and your co-signer’s financial situation. For that, you have to research each option carefully. Pick a loan that offers the best interest rate and flexible repayment terms to suit your financial needs while studying abroad. Here are some reliable loan programs:

The USA

State Bank of India (SBI) offers education loans for Indian students gaining admission to US universities. SBI’s loans can cover tuition, living costs, and other expenses. Interest rates are competitive, starting from 8.50% per annum. HDFC Credila is another popular option, providing flexible repayment plans and loans tailored to specific universities. Credila often covers up to 100% of expenses.

International students are not eligible for US federal loans like the FAFSA. So, private or school-based loans are typically the only options you have in the USA. You can access loans through private lenders like Sallie Mae and Discover (cosigner required) or no-cosigner options like MPower Financing and Prodigy Finance. Some universities, like Harvard University and New York University, offer school-specific loans. International lenders, such as Future Finance, also provide options based on future earning potential, without requiring a US-based cosigner.

The UK

The British Council has loan schemes specifically for Indian students. It partners with UK universities and financial institutions to offer favorable loan opportunities. ICICI Bank also offers education loans to students pursuing degrees in the UK. Interest rates typically start around 10.75% per annum. Student Loan Company also finances millions of students at the beginning of the academic year. These loans can cover course fees, living expenses, and travel costs.

Canada

Indian students can take out loans from banks like Axis Bank and Punjab National Bank to study in Canada. Canadian programs like the Canada Student Loans Program (CSLP) are also an option. This government-backed program offers low-interest loans to students attending approved Canadian universities. Indian students can apply for these loans with a co-signer who is a Canadian resident. For select Canadian schools, you don’t need any cosigner. 

Some universities, like the University of Toronto, also have specific loan programs for their international students. Additionally, private lenders such as ScotiaBank provide options for international students with a Canadian co-signer.

Australia

Indian banks like SBI and ICICI offer loans specifically for those planning to study in Australia. These loans cover tuition and living costs. Interest rates vary but typically range from 9% to 11%.

In Australia, international student loans are mainly available through private institutions like ANZ and Commonwealth Bank, often requiring local guarantors. Some universities, such as the University of Melbourne and UNSW, provide installment-based payment plans.

Eligibility Requirements for a Student Loan Application

Here are the key eligibility criteria for a student loan application if you are planning to study abroad after 12th grade. Meeting these criteria will improve your chances of securing a student loan. Check with your lender for any specific additional requirements: 

Nationality:

⦁    Must be an Indian citizen.
⦁    Must be over 18 years old (minors need a parent/guardian co-signer).

Academic Requirements:

⦁    Must have an offer letter from a recognized university abroad. 
⦁    The course should be full-time.
⦁    Universities with high rankings receive preference.
⦁    Courses in fields like engineering, medicine, and management may get easier approval.

Co-borrower:

⦁    A co-borrower or guarantor is a requirement (usually a parent or close family member).
⦁    The co-borrower must have a stable income and a good credit history.
⦁    Loan approval often depends on the co-borrower’s financial status.

Additional Factors:

⦁    Lenders may consider the ranking of the university and the course type.
⦁    A strong academic background can improve the chances of approval.
⦁    Lenders may assess the job market for your field to determine repayment ability.

Step-by-Step Guide to Filing a Student Loan Application

Applying for a student loan can be simple if you follow the right steps. Here's how to complete your application:

Step 1: Research loan options and lenders
Start by researching different student loan options. Compare banks, interest rates, and repayment terms. Choose a lender that offers the best plan for your needs.

Step 2: Gather the necessary documents
Before starting your student loan application, collect important documents. These include your admission letter, academic transcripts, proof of identity, and financial statements. Lenders may also ask for details about your chosen course and university.

If a co-applicant is a requirement of the application process, they must provide income proof and their credit score. A stable financial background for the co-applicant increases approval chances. Make sure all documents are up to date and accurate. Providing incomplete or out-of-date information can delay the approval process.

Step 3: Prepare a co-signer if necessary
Many banks ask for a co-signer, especially for large loans. A co-signer, usually a parent or guardian, guarantees repayment of the loan. Make sure your co-signer has a stable income and a good credit history.

Step 4: Fill out the application form accurately
Once you have everything ready, fill out the student loan application form carefully. Double-check all details to avoid mistakes. Incorrect information can delay your loan approval.

Step 5: Submit and track the application status
After submitting your student loan application, keep track of its status. Some lenders offer online tracking tools. Respond promptly to any requests from the bank for additional information.

Tips to Increase Approval Chances for Your Student Loan 

To improve your chances of getting a student loan, follow these simple steps. 
⦁    First, check your credit score. A good score helps you get lower interest rates. If your credit score is low, work on improving it before applying. 
⦁    Next, choose a reliable co-borrower. This person must have a stable income and a good credit history. Most banks require a co-borrower for approval. 
⦁    Apply to recognized universities. Lenders are more likely to approve loans for well-known institutions, as they see these as less risky.

Factors to Consider When Choosing a Student Loan

Choosing the right student loan is important for managing your student finances. 
⦁    Look at the interest rate first. A lower rate means paying less over time. 
⦁    Consider the repayment tenure. Longer tenures may reduce monthly payments but increase total costs. 
⦁    Check if the loan offers a moratorium period. This allows you to start paying after you complete your course. 
⦁    Finally, calculate the EMI (Equated Monthly Installment) before committing. A manageable EMI ensures you won't struggle to meet payments.

Common Mistakes to Avoid During the Application Process

Many students make avoidable mistakes during the student loan application process. One common mistake is submitting incomplete documents. Always double-check before submission. Another is ignoring interest rates. A high rate can increase your debt significantly. So, don’t rush through the terms. Misunderstanding repayment conditions can lead to financial problems later. Take your time to understand all terms before applying.

Repayment Options for Student Loans

When you take out student loans, deciding on the repayment options beforehand is mandatory. Choosing the right repayment method can help manage your student finances effectively. Always review the terms and conditions before finalizing your student loan application. Make sure you understand how each option affects your overall loan amount.

Here are some common repayment methods available for student loans.

Equated Monthly Installments (EMI): EMI is the most common repayment method. You pay a fixed amount every month until you fully pay off the loan. The EMI covers both the principal and interest. This method helps you plan your monthly budget and ensures that you clear your loan in a set period.

Deferred Payment Plans: Many banks offer deferred payment plans. With this option, you do not have to pay anything while you are studying. Once you graduate, you begin repaying the loan. This plan helps students focus on their studies without worrying about immediate repayments. However, interest may accumulate during the study period.

Post-Study Repayment: Some banks allow a grace period after graduation before repayments start. This period can range from six months to a year. It gives you time to find a job and stabilize your finances. During this time, you can also choose to make interest-only payments to reduce the overall loan burden.

Rounding Up

The student loan application process can be a vital step toward realizing your dream of studying abroad. Start your application early to secure the funds you need for tuition and living expenses. Don’t forget to explore scholarships to lighten your financial burden as well. With the right planning and resources, you can manage your student finances effectively and focus on your studies. Remember, each step you take brings you closer to your educational goals. Embrace this journey with confidence, and soon you'll be on your way to experiencing the world while pursuing your passion.