Masters-level study isn’t cheap and many students need to secure loans to afford their studies - you might be one of them.But, if you’re considering international study, you might need to compare loans from local institutions with international offerings. Often, the terms you’ll find on international loans differ from those you’re used to seeing. This guide breaks it down - and explains some of the norms you might expect.
You may know this term as: security
Some providers require collateral before they will extend a loan. Physical assets, such as property, are preferred forms of collateral, though some providers will accept other investments.
In India, loans are often assessed on the value of the security offered. Not all providers or loans require collateral; in countries like the United States and the United Kingdom, education loans usually don’t require it.
Prodigy Finance loans: no collateral is required or accepted.
You may know this term as: co-borrower
While some Indian banks won’t consider providing education loans without collateral, some will consider loans based on the credit profile of co-signers.
In some countries, such as India, the term may be known as co-borrower, and in other countries this term means something else and is only used for loans for assets that can be owned by more than one person (such as property or cars).
In countries like the US, students often secure loans without co-signers, however it’s rare to find this available to international students.
Prodigy Finance loans: no co-signer is required or accepted. Your loan is assessed according to your abilities and your anticipated post-masters income.
This is an amount of money a borrower will need to pay the bank as a portion of the total loan amount. Education loans offered by Indian lenders often only cover a percentage of the total cost - as a portion of the total loan amount - and require borrowers to pay the margin money before providing funds.
This isn’t a global norm; education loans in other countries may cover the full cost of education and don’t usually require any form of margin money.
Prodigy Finance loans: Prodigy Finance never requires margin money. Depending on the course and university you attend loans may cover 100% of the cost of attendance. If full financing doesn’t come from Prodigy Finance, a demonstration of the remaining funds is necessary (based on understandings with the relevant schools).
You may know this term as: moratorium period
Most education loans have a grace period when no student loan repayments are expected or required; interest applied to your loan balance during this time is usually compounded simply and some students prefer to pay the interest during their grace period.
The grace period for education loans often lasts until six months after course completion.
Prodigy Finance loans: borrowers pursuing full-time courses have a grace period that lasts until six months after graduation. Students accepted into part-time programmes begin repayment three months after the last disbursement.
Loan confirmation letter
You may know this term as: sanction letter
This document demonstrates proof of ability to pay to universities and immigration officials. It’s critical for international students to secure this document as soon as possible to begin the study visa application process.
In India, there are sometimes fees attached to sanction letters, though this isn’t a universal norm.
Prodigy Finance loans: an electronic copy of your loan confirmation letter is provided by Prodigy Finance for free - and it can be used to secure your study visa. If you require a physical copy of your loan confirmation letter, you’ll need only pay for the shipping of it to your physical address.
Variable interest rate
Variable interest rates reflect the current state of the market, though it makes repayment amounts variable.
Public Indian banks provide loans with the MCLR interest rate base, though private banks are free to set proprietary rates, which may include any number of factors, including bank profits. In the US, UK, and EU, many lenders use LIBOR, an independently-set and publicly-transparent rate that aligns with current market trades.
Prodigy Finance loans: the interest rate on your loan has two parts: your personal interest rate portion (based on your financial situation) and LIBOR, which is an independently set, public base rate. The 3-month LIBOR rate applied to your loan is dependent on the currency in which you borrow.
Very simply, this is the total duration of your repayment cycle; it begins when your grace period ends until the last expected date of repayments.
There isn’t an international norm for loan tenure, it often depends on how much you borrow and affordability of loan repayments.
Prodigy Finance loans: borrowers have a few options for loan tenure based on their loan amount and affordability; your loan tenure could be 7, 10, or 15 years. Loan tenure begins from the date of first disbursement.
You may know this term as: EMI
Estimated monthly repayments (EMI), refers to the amount you’ll repay monthly after your grace period ends. EMI is completely dependent on your loan tenure and amount borrowed.
Prodigy Finance loans: you’ll have an understanding of the expected monthly repayment amount based before you accept your loan. But, as interest is variable, this amount will shift as LIBOR adjusts to current market factors.
There can be any number of fees attached to a loan; while some are explained clearly upfront, some institutions hide fees within other fees or include these as additional charges at a later point.
For instance, common fees on your study loan might be insurance, a currency conversion fee, a processing or admin fee, and, possibly, additional taxes.
Prodigy Finance loans: there is a single admin fee applied to your loan and is clearly demonstrated upfront. There are no other fees, provided your account remains in good standing throughout your loan tenure.
Early repayment penalties
You may know this as: prepayment penalties
Depending on the loan you take, penalties may apply for paying your loan off sooner than agreed. Not all institutions charge these amounts, but you should know upfront.
Prodigy Finance loans: There are no penalties for early repayment of your loan. Making extra payments or larger payment will reduce the amount of interest you pay overall.
Annual percentage rate (APR)
While it’s uncommon to see this attached to Indian loans, APR is legally mandated in countries like the US and UK as it’s the most accurate representation of the full cost of your loan on an annual basis.
APR includes your interest rate and all fees and it helps you to understand the full impact of the fees on your loan. If you’re comparing loans, remember that APR is always greater than the interest rate.
Prodigy Finance loans: your preliminary loan agreement will include APR, but it also shows you exactly how it’s broken down for your reference and so you can use it as a template to work out APR on other loans you might be considering.
Curious about Prodigy Finance loans?
Prodigy Finance offers international student loans for those pursuing engineering, business, law, and public policy masters degrees at top universities across the globe.
See what Prodigy Finance can offer you to pursue your degree here.
This article is a part of Prodigy Finance's FinLit series of webinars and blog articles. Read the rest of the articles here:
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