Diana Dsouza
on 26 June, 2017

Education Loan 101





Attending a grad school can be the best decision for your career, but finding ways to pay for school can be challenging. Your initial consideration would obviously be the programs and the location of the university, but there’s no way you can ignore the cost of education at the university. Naturally you would think your parents could pay for your education, like they may have done all these years. But for those who don’t have that option there are student loans!

There are different ways in which you can fund your education abroad, this article will introduce you to various aspects of a student loan.

What is student loan?

A student loan is a loan product designed specifically to help students pay for post-secondary education and the associated fees - tuition, books and supplies, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still at the school.

Why is student loan beneficial?

Sometimes the family income and savings may not be enough to fund the student’s education. In such cases a student loan has to be taken from banks or non-banking financial companies (NBFC). A student loan can be used to sponsor the educational cost completely or partially.

A student loan ensures that the university education gets completed without any sort of financial hindrances.

The general perception is that loans are a bad debt. It means that you are taking a loan for something whose value will drop over time. It is not the same with student loan since it is an investment in yourself. You are investing in your own university education which will help you get a job. Through which you can earn much more than the loan amount. 

There are two types of loans that can be taken.

  1. Secured Loan: It is the type of loan where the borrower promises some of his assets as collateral. When someone takes a secure loan he has to mortgage his property to the bank or financial company.
    NOTE: The property mortgaged by the borrower cannot be agricultural land.
  2. Unsecured Loan: Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages. There are a number of conditions that have to be fulfilled in order to get an unsecured loan. 

Types of loan vendors:

  • Banks: Banks provide secure as well unsecure loans. The rate of interest on loans given by banks is usually less than the rate of interest given by non banking financial companies. Unsecured loan amount provided by banks is usually less than the unsecured loan  amount provided by non-banking financial companies. Banks provide loans upto an amount of 80-90% of mortgage value.  
  • Non-Banking Financial Companies: Non banking financial companies provide secured as well as unsecured loans. The rate of interest given by non banking financial companies is usually more than the rate of interest given by banks. The loan amount for unsecured loans given by non banking financial companies is usually greater than the amount given by banks. Non banking financial companies provide loans upto an amount of 100-120 % of mortgage value. NBFCs have to be provided with partial payment. This means that while the student is still studying, the co-borrower has to pay a small amount of money, every month, to the NBFC. 
  • Crowd-funded companies:  There are some companies which specialise in student financing. These companies provide loans to students going to selected universities only(To ensure security). They provide loans in the local currency of the country in which the student will be studying. The loan has to be re payed in the same currency. In cases where the student returns to his home country after education, it becomes difficult to pay back the loan due to the economic differences between the countries and the historically increasing exchange rates. 

Student loan refinancing is a way of paying off your old loan and obtaining a new loan with different repayment terms and at a new interest rate (hopefully lesser interest rate).

Conditions for getting a loan:

  • Borrower’s profile: GRE score of the student is an important factor in getting a loan. Along with the GRE score, academics(undergrad score) and job information (in case the applicant is working) also matter while getting a loan.
  • Co-borrower: The co-borrower’s profile also plays an important role in getting a loan. The financial background, location and owned assets are important for getting a loan.
  • University: The ranking of the university in which you have taken admission also matters. Better the ranking of the university, better chances of getting a loan. A better university also offers better jobs which increases the security on the loan.
  • I-20: The I-20 is important since it has the fee structure of the university and hence it is useful in deciding the loan amount.
  • Underwriting norms: Underwriting norms are the guidelines established by loan vendors to ensure that safe and secure loans are issued. They are issued to decide if loan should be issued to a person or not, how much loan the company is willing to issue and at how much interest rate should the loan be issued.  

Documents required:

Basic KYC documents of borrower and co-borrower are required. Financial documents of borrower and co-borrower are required as well. At the time of application, Yocket loan assistant or the bank will provide you with the specific requirements.

How to find the best loan provider?

There are many loan providers  such as banks and non-banking financial companies who provide student loans. Finding the best loan provider to suit your profile is very difficult and involves a lot of research. Yocket can help you in making this process hassle free by evaluating your profile and connecting you to the best loan provider depending on your profile.

How can Yocket help you?

Yocket’s aim is to provide you with the best loan providers depending on your profile. We are continuously working on getting more people on our network so that our users can benefit from these services.

If you wish to avail Yocket’s loan assistance program, you can fill up the form here. We will then assign a Yocket assistant to you who will help you throughout the loan procedure. The Yocket loan assistant will review your profile and requirements and connect you to the most appropriate loan provider.


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