Student Loan Eligibility: Important Education Loan Terms To Know

You’re doing your masters—congratulations! It’s a once-in-a-lifetime investment.

It’s time to consider about supporting your studies whether you’ve applied to your favorite institutions or been accepted. Before searching for an international student loan lender, the following 11 terms are essential. Skipping this step could cost you thousands and tie you into a long-term loan you don’t want.

1. Collateral

• What is it? Sometimes a lender will request physical or financial assets as a form of surety against your loan.
• Why is it important? Collateral can be seized if you fail to make your loan repayments, so you’ll need to pay close attention to the requirements.
• What’s normal? Loan providers in some countries, like India, need collateral whose value may exceed the loan amount. US and UK school loans don’t demand collateral. Prodigy Finance, an international lender, does not require collateral.
  

2. Co-signer (also known as: co-borrower)

• What is it? A co-signer is someone who signs your loan alongside you, leaving them liable for loan repayments if you fail to make them. While co-borrower is a phrase used in India, it has a different meaning in nations such as the United States and the United Kingdom.
• Why is it important? Providing your lender with the means to recoup their money from someone if you don’t make your repayments is usually linked to lower interest rates from local banks.
• What’s normal? As an international student, you’ll probably also find it’s essential to have a co-signer for loans provided by banks in your host country. International lenders can help if you don’t have a co-signer at home or in your host country (or, if you simply don’t want to burden them).

3. Fees

• What are they? There can be any number of fees attached to a loan, such as currency conversion fees, insurance and processing or admin fees.
• Why is it important? Some lenders are entirely transparent about fees (especially in countries where APR is mandated), whereas others aren’t – and you need to be aware of what you’re being charged and when.
• What’s normal? How and when fees are charged can vary widely between lenders. Always do what you must to fully understand the fees attached to your loan.

4. Grace period (also known as: moratorium period)

• What is it? A grace period is the time when you aren’t expected to make loan payments. It’s sometimes known as a moratorium period, though US and international lenders tend to use the term grace period.
• Why is it important? Interest may still be placed to your loan during this time. Understanding the conditions of your grace period and how interest is calculated on your account may assist you in choosing between loans. It will also offer you time to plan your post-graduation expenses.
• What’s normal? During your grace period, the interest on your loan is normally compounded simply. For full-time students, grace periods can last up to six months after course completion.

5. Early repayment penalties

• What are they? Charges or fees you must pay if you choose to repay your loan early. You may also see the term prepayment penalties.
• Why is it important? This allows lenders to recoup some of the money they expected to earn through interest.
• What’s normal? There aren’t many banks in the world that have early repayment penalties. But it does happen, and you should be aware of these charges ahead of time. International lenders, including Prodigy Finance, only charge interest on the outstanding sum; if you repay early, you save interest – and there is no prepayment charge.

6. Loan confirmation letter (also known as: sanction letter)

• What is it? This is a document from your lender which shows how much money you’re borrowing; it’s needed to prove to your university and the relevant immigration officials that you’re able to pay.
• Why is it important? Without this document, you may be unable to secure your spot or your study visa. You’ll want to get your hands on this document as soon as possible.
• What’s normal? Some lenders charge a fee to release your loan confirmation letter, but that’s not universal.

7. Loan tenure (also known as: loan duration or repayment cycle)

• What is it? This is the total length of time you have to repay your loan, beginning at the end of your grace period and ending with your last payment.
• Why is it important? The longer the loan tenure, the lower your interest rate, but the more you’ll pay over that time. The reverse is true for shorter loan tenures.
• What’s normal? There is no international loan tenure standard, however you should expect alternatives ranging from seven to twenty years. TIP: Seek out lenders with adjustable terms so you may discover a timeframe that works for you.

8. Margin money

• What is it? Being that the loan may only cover a fraction of the total loan amount, lenders may compel borrowers to pay them a portion of the whole loan amount released. Margin money is the money given to the bank before it is returned as part of the loan in India (and margin may relate to different concepts in other countries).
• Why is it important? If you need to pay into your lender to secure your loan, you’ll need to know quickly how much this is, when you’ll need to pay it and what fees or interest is attached to this amount.
• What’s normal? Margin money is most commonly found in India; it’s rare in countries like the US and UK.

9. Monthly payments (also known as: EMI)

• What is it? You may know this as Estimated Monthly Installments (EMI) and it refers to the amount you’ll pay each month after your grace period ends.
• Why is it important? Each borrower has a unique monthly payment (determined by the amount borrowed as well as the length of the loan). Furthermore, with a variable interest rate, the actual amount owed varies from month to month.
• What’s normal? There’s no norm as it’s completely personalised (and will definitely fluctuate if you have a loan with a variable interest rate.

10. Variable interest rates

• What are they? Variable interest rates fluctuate alongside the market rather than remaining fixed throughout your loan tenure.
• Why is it important? When working with variable interest rates, your minimum monthly due will change according to the changes in interest rates.
• What’s normal? Variable interest rates are the norm for private education loans; these include MCLR, Prime, and LIBOR. The latter is a transparent, independently-set rate aligned with current market trades.

11. Annual percentage rate (APR)

• What is it? Annual percentage rate, or APR, is expressed as a percentage and it includes your interest rate plus all the fees and costs associated with your loan. That means it’s always higher than your interest rate.
• Why is it important? Instead of interest rates, APR is used because it reveals the impact of fees on the cost of your loan as well as your interest rate. It is significantly more accurate than simply looking at interest rates.
  
• What’s normal? This varies from place to place. Lenders in countries like the US and UK are required by law to provide APR to their customers to avoid hidden fees.

Education Loan Eligibility criteria:

Generally, while applying for a student loan, you must be between the ages of 18 and 35. He or she must be pursuing a graduate/postgraduate degree or a postgraduate diploma. The applicant must be enrolled in an institution or university that is associated with the UGC/AICTE/Govt, etc.

Finding the right international study loan for you

Now that you’ve got the lingo down, it’s time to start looking for a loan. Because this is a big financial decision which impacts your future, it’s critical to explore every available option. That means you should check out:

• Local banks
• Lenders in your host country
• International loan providers such as Prodigy Finance.

Prodigy Finance has helped over 13,900 students borrow $693 million for their education. Collateral, co-signers, or margin money are not required (or accepted) by Prodigy Finance. There are no early repayment penalties, and there is only one administrative cost (no other fees will be levied as long as your account is in good standing).