Education has always been an important aspect of Indian culture, and it has been deeply valued across generations. In recent years, this strong emphasis on education has contributed to a significant rise in the number of Indian students seeking higher education abroad.
This trend is driven by aspirations to attend prestigious foreign universities, coupled with the desire for better career opportunities and better lifestyles. The availability of education financing has also played a key role in making these dreams achievable.
As a result, the demand for education loans has surged over the years, providing essential financial support for students pursuing their academic dreams. This further makes education financing a multi-decade secular growth opportunity in India. Education-focused non-banking financial companies (NBFCs) are crucial in this process, offering customised financing solutions tailored to individual needs.
Such financial lenders not only facilitate access to quality education but also help students preserve family savings while achieving their goals independently. However, it’s essential to carefully consider a few critical aspects before applying for an education loan to ensure the best financial outcome.
It is important to understand the total expenditure of studying abroad before applying for an education loan: As students start planning their study abroad journey, it is essential to understand all the financial commitments involved in such an endeavour. Besides tuition, one needs to account for accommodation, living expenses, travel, insurance, and other unforeseen costs. This will enable the student to understand the exact financing requirements and apply for the amount necessary.
Applying for more than required is never advisable. Tools like the Education Loan EMI Calculator and College Course Expense Calculator can help students estimate these expenses accurately. This preparation ensures that the academic aspirant is financially ready for every aspect of their international education.
Thorough research is critical for understanding the financing solution: Once the student has a clear understanding of the overall cost of education, the next step will be to explore the education loan options that are available. The students need to analyse the options provided by different lenders and their eligibility criteria, interest rates, disbursement processes, repayment terms, co-borrower requirements, collateral requirements, and processing fees. A thorough research on all the above parameters will enable the student to identify a loan that will not only cover their overall expenditure but will also align with their financial situation and educational goals.
The financing solution should cover the holistic cost of education: New-age NBFCs offer comprehensive education loans that provide holistic coverage for not only the various educational expenses but also for the entire student journey. These loans go beyond just tuition fees and encompass a wide range of financial needs, including travelling expenses, accommodation costs, the purchase of learning devices, living expenses, and other education-related expenditures.
This holistic approach ensures that students have the financial support needed to cover all aspects of their education journey, enabling them to focus on their studies and career development without worrying about finances.
Proper documentation is an important step in the overall application process: Making a checklist of all required documents is recommended. Students must ensure all required documents are accurately prepared and submitted to avoid delays. Complete and correct documentation helps streamline the application, increases the likelihood of timely loan approval, and minimises the risk of hitches during the sanctioning process.
Understanding the loan evaluation process: Education loans are specially designed to fulfil the academic aspirations of students. Thus, new-age NBFCs have implemented a student-centric approach to evaluate loan profiles. They assess the student rather than depending only on the co-borrower’s financial background. They evaluate students’ past academic performance, entrance exam scores, the chosen course and university, future employment potential, and many other parameters.
Apply well in advance: Students should apply for an education loan well in advance, as lenders need time to complete pre-sanction procedures, verify documents, and finalise the loan. The approval process can vary depending on the financial institution, so starting early helps avoid the last-minute rush. By applying ahead of time, students can ensure their loan is approved on schedule, allowing them to focus on their studies with peace of mind.
Plan a smart repayment strategy from the start: Although student loans come with a grace period, education-focused lenders, such as Avanse Financial Services, encourage students to make small contributions in the form of simple interest/partial interest, as this is not an interest-free period. Therefore, students are encouraged to embark on their loan repayment journey right from the start and to choose a repayment plan that aligns with their financial needs. This approach empowers students to proactively manage their loans and instils financially prudent habits.
Education loans serve as gateways to numerous opportunities for students, yet their optimal utilisation relies on thoughtful decision-making. A thorough exploration of the intricacies surrounding these financial instruments empowers students to understand the essential aspects of shaping a thriving academic and education loan journey.
Therefore, it is crucial to make well-researched choices. Successfully navigating the realm of education financing depends on the ability to make informed decisions, thereby unlocking the complete potential of resources.
Rajesh Narayan Kachave, Chief Business Officer - Student Lending International Business, Avanse Financial Services Limited
