THIS BLOG INCLUDES:
1. Collateral loan
4.Early Repayment Penalties
5.Loan Confirmation Letter (Sanction Letter)
6.Grace Period (Moratorium Period)
8.Loan Tenure (Repayment Cycle)
9.Estimated Monthly Installments/ Monthly Payments (EMI)
10.Variable Interest Rates
11.Annual Percentage Rate (APR)
Once you have decided to pursue your master’s abroad, it is time to think about funding your higher studies. If you are going to apply for an educational loan, you need to be aware of important terms to find yourself the right international study loan lender. Failing to do so might land you in long-term debt. So let us get acquainted with some important terms used in the industry.
It is when the lender will ask for your physical/financial assets as a form of surety against your loan. It is to make sure that you pay the entire loan amount without fail. If you are not able to, then your assets will be seized. In India, loan providers request collateral, the value of which may be significantly higher than the actual loan amount whereas, in countries like the US and UK, it is unlikely that lenders will ask for the collateral.
It is someone who signs your loan with you which makes them equally responsible for your loan repayments. In case you default, the co-signer will have to pay your loan amount. You need to be aware that the term co-has an entirely different meaning in countries like the US and UK. Also, if you have a co-signer, you will get the loan with lower interest rates from local banks since you are giving the lender a means to recoup their money. In India, you can get a loan without collateral if you have a strong co-signer.
You might be aware that there can be multiple fees attached to a loan. These include currency conversion fees, insurance and processing or admin fees. Most of the lenders will share all the information on fees clearly with you, especially in countries where APR is mandated. However, there would be others who won’t be transparent about it and you will end up knowing about these details much later. Hence, you should ask your lender about the fees attached to the loan and when they would be charged so that you can choose your lender wisely. Fees charged by different lenders may vary widely.
If you decide to repay your loan early, you will be required to pay Charges or fees for the same. Hence, you must be aware of the prepayment penalties. The reason behind this is to help lenders recoup the money they would otherwise have earned through interest. It is unlikely to find banks abroad with repayment penalties. That is why you must be aware of the charges in advance. Many international lenders like Prodigy Finance, will charge interest only on the outstanding balance. So if you plan to repay your loan amount early, you will save on interest without any prepayment charge.
Your lender will give you this document, stating the amount you are borrowing from him. It will be used to show your university and immigration officials that you have sufficient funds to pay your tuition fee and other expenses. Failing to provide this document, you might lose your sport or study visa. You should retain this document from your lender at the earliest to avoid any delay in the process. You must know that some lenders will charge a fee to give you the sanction letter.
It is the time when you are not expected to make loan payments. Also known as the moratorium period in many countries, however, the US and many international lenders use the term grace period. During the grace period, interest may be applied to your loan; if you understand how interest is applied to your account during this period, you will be able to decide between loans. The grace period lasts up to six months after the program completion of students (full-time) and the interest applied to your loan during this time is usually compounded simply.
You will find that sometimes lenders will ask you to pay them a portion of the total loan amount disbursed since the loan amount may only be a portion of the full loan amount. Margin money is the amount you pay to the bank before returning it as part of the loan. In this case, you need to know how much is the margin money, when you will be required to pay it as well as fees/interest. You will find that the margin money concept is commonly found in India and not in other countries.
Loan tenure is the total time you get for loan repayment. It begins at the end of your grace period and concludes with your last payment. If the tenure is long, the interest will be less but the amount paid by you will be very high. If your tenure is less, your interest may be higher but you will end up paying less amount. For international loans, there is no norm as such, but you may expect to find the range between seven to twenty years. Make sure to find lenders with flexible terms so that can choose a timeframe that works best for you.
EMI refers to the amount you will have to pay after the grace period. Based on the amount you have borrowed as well as your loan tenure, you will have a unique EMI. Moreover, the EMI amount will vary from month to month because of the variable interest rate. It is completely personalized and will fluctuate because of the variable interest.
It is important to know that Variable interest rates are not fixed and fluctuate as per the market. Your monthly due will vary according to the interest rates. Private education loans like MCLR, Prime, and LIBOR usually have variable interest rates which are transparent and have a set rate which is aligned with current market trades.
APR (%) is your interest rate plus all the fees/costs associated with your loan. It is always higher than your interest rate. It is used to show the effect of fees on the cost of your loan and your interest rate. However, this is different in different places. For ex- Laws in the US and UK demand lenders to provide APR to their borrowers to avoid hidden fees.
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