by Every student has thought of studying and living abroad at some point. Still, this desire completely takes a backseat when you think about the enormous burden of expenses or insufficient funds. But, with easy availability and the accelerated process of education loans, this is no longer a far-fetched reality. Read and skim through the entire blog to unlock the education loan eligibility criteria, documents required, and best ways to choose the best education loan in your interest.
What is an Education Loan?
An education loan is a significant financial aid designed to help and assist aspiring students facing hurdles like being unable to pay for tuition, books, living expenses, travel, student housing, exam fees etc. For example, providers like Auxilo and Lorien Finance offer 100% coverage of education loans to international students. Unlike other financial aid like scholarships or apprenticeships, education loans are supposed to be paid back after a certain period. Compared to all the other loans on the market, these have much lower interest rates and have a longer tenure for repayment. Still confused by all the jargon of “interest” and “tenure?” Check out our blog on how to get a student loan and then come back to read this!
Types of Student Loan
There are many types of student loans and possibilities for fulfilling your study abroad dreams. Here is a breakdown of the different types of student loans you can get from your bank or lender.
Based on your level of education
- Undergraduate loans: As self-explanatory as this can be, undergraduate loans are usually given to recipients who will pursue their bachelor’s degree.
- Postgraduate loans: If you are looking to pursue higher education and are having difficulty raising adequate funds, taking a postgraduate loan is the best route. You must hold a bachelor’s degree from a recognised university to be eligible for this loan.
- Career Development Loans: This loan is lent to professionals at the peak of their careers who want to upscale their skills and expertise. If you want to make a career jump by doing an MBA or a PhD programme, such loans can be a gateway to your dream programme, taking you closer to your ideal lifestyle.
Based on your study location
- Domestic study loans: Applying for an education loan is not only done for international studies but also for domestic purposes.
- International study loans: Students who aspire to study abroad can apply for this type of loan. Educational loans abroad are expensive compared to domestic study loans.
Some providers like Cujo and GOCAP also provide personal loans to students on a bond basis. These quick loans are not traditionally education loans but can be helpful for international students.
Education Loan Eligibility
Students need to understand the eligibility guidelines and qualify for the same, to be able to apply to their preferred money lending institution/bank for their Education Loan. The eligibility criteria vary for different banks. However, some common factors that are taken into account by all money-lending institutions (banks) include:
- Age: If the applicant is under 18, then his or her parents must apply for the loan on their behalf.
- Citizenship: The loan applicant must hold citizenship of the country.
- Academics: The applicant must have a strong academic record.
- Institution: The applicant must have received admission to a reputable overseas college, university, or institution.
- Programme: The applicant’s chosen course must be technical or professional since banks favour programmes that prepare students for employment.
- Aspiration: The aspirant’s goal must be a graduate, postgraduate, or post-graduate credential.
- Track record: A strong academic record enables quicker loan approval.
- Co-applicant: Full-time students must have a co-applicant, who may be either a parent, a guardian, a spouse, or a parent-in-law (in the case of married candidates). The co-applicant needs a steady source of income.
Documents Required for an Education Loan
Before processing your loan application, the bank will require you to provide and testify to a few documents that will help smooth the process of taking an education loan. Most lenders and banks require the following documents but always cross-check with your bank for any additional document requirements because all banks function and process education loans differently
- A well-completed loan application filled in with all the details.
- Any official government ID or proof like a passport, driving license, etc. (Usually asked for age identification).
- An address proof.
- A very well-detailed breakdown of the costs that you want the bank/lender to cover.
- Income proof (if applicable).
- A valid passport.
- All your academic transcripts and certificates.
- If you have appeared for exams like the GMAT, GRE, TOEFL, or IELTS. You will have to show proof.
- Acceptance letter from the university you have applied to for your course.
- Recent passport-sized pictures.
- Your previous bank statements.
Did you get all your documents in place? Well done! Let’s also understand how a typical education loan process works.
How to Choose the Best Student Loans?
With so many lenders and attractive interest rates around, the difficulty of getting the best deal out of a loan is perpetually great. Many people wrongly choose student loan plans that feel like an extra weight on their shoulders. To avoid this, we are sharing some of our tips and insights that will help you select the best student loans for your interest
- Check the tenure of your educational loan. Choose a loan that allows a longer tenure to have less burden of paying higher EMIs every month.
- Check the moratorium period’s duration. A moratorium period is when you are not required to repay the loan to the bank. Student loans often begin repayment a year or two after you complete your studies.
- Choose a lower-interest rate loan, saving you a lot of money and getting you the best deal.
How to Improve Education Loan Eligibility
Securing an education loan is a huge step towards your academic goals and improving your chances of loan approval gets you there sooner. Use the following tips to improve your education loan eligibility:
- Maintain a strong academic record: Banks prefer students with a consistent and sharp academic history. Work towards higher grades and actively participate in extracurricular activities to showcase your highest potential.
- Choose a reputable institution: Opt for a reputed and accredited educational house. It strengthens your loan application in the eyes of lenders, favouring applications coming in from well-recognised universities or colleges.
- Outline a Clear Career Path: Clearly demonstrate how your career aspirations align with your chosen course. Applicants with a well-defined career path indicate a focused life approach, inspiring more confidence in lenders.
- Have a Co-Applicant with a steady income: As a full-time student, having a steady earning co-applicant, like a parent, guardian, spouse, or even a parent-in-law, can impact your loan eligibility positively as it adds a layer of security for lenders.
- Improve Your Credit Score: Manage your finances responsibly to maintain a healthy credit score. On-time bill payments and responsible credit use contribute to a positive credit history, which is indeed an important factor in loan approval.
By deploying the strategies above, you are not only elevating your education loan eligibility, but you are also presenting yourself as a committed student. Remember, smart steps taken today can make way for a smoother education financing journey tomorrow.
So, now that you are well informed about the entire process of education loan eligibility, documents, process, and factors you should consider while looking for one, the only thing left to do is apply. We understand the anxiety and second thoughts that might be racing through your mind. One of the most prominent is how you would manage this massive debt. For that, you can check out our blog on 10 Tips for Student Loan Management, which will help you develop a complete action plan.
