You aced your GRE/GMAT score, you have selected your college as well, now there’s only one step left between you and your dream of studying in the USA. Availing an education loan!
Banks have simplified the process of availing an education loan for the USA by resolving the complexities of financing. With the right guidance, students can complete the loan process hassle-free without any complication.
While the loan application, approval, disbursement and repayment process may differ among various financial institutions, most banks and NBFCs follow a simple procedure: -
It is advisable to start the process of loan evaluation before the admission is confirmed. The expenses evaluated should cover college and hostel fee, examination, library and laboratory fee, cost of books and equipment and travel expenses. The loan amount should be precise as it can make a difference in the rate of interest. While education loan can be applied before admission is confirmed, disbursement will take place only after getting the I-20 form from the college which includes fees details per year along with living expenditure.
The entire process of comparing different banks and NBFCs may seem daunting to students and their families since it requires a lot of time and efforts. Instead of going to different banks, you can use Credenc as it provides a Single window platform i.e., students can compare and choose from different banks and NBFCs to apply from.
Banks and NBFCs can be compared on various factors: -
INTEREST RATE: While comparing education loans, the borrower should consider the rate of interest, the bank is offering. Lower the interest rate better is the loan offer. Different banks have different criteria for fixing the interest rates on loans; borrower’s academic performance, college, family background, collateral provided, etc are factors on which the interest rate can be negotiated.
LOAN AMOUNT: A borrower must consider the loan amount that the bank is ready to offer. If the loan amount that the bank is offering, is less than what the borrower needs, then the borrower should consider loans offered by other banks.
REPAYMENT PERIOD: The repayment period effects EMI, and thus, the borrower should choose the repayment period he/she is getting, corresponding to the EMI that he wants to pay after his/her course.
MORATORIUM PERIOD: Some banks offer moratorium period ranging from 6 months to 1 year, whereas some of them may not even offer one. The borrower should consider all these factors to choose the best offer for him/ her.
Application process starts with filling out the application form. You should have the required documents to complete the application process.
The documents required are: -
Offer letter given by the university (proof of admission)
Loan application form (filled)
The estimated cost of study (as per the I-20 form)
Original education certificates/mark sheets
Documents of qualifying exams (GRE, TOEFL)
Residential Proof of student and co-borrower
IT returns of co-borrower
PAN card and other identity proofs of student and co-borrower
Proof of income of co-borrower
Details of assets and liabilities of parents/co-applicants.
The loan is disbursed after receiving the I-20 form from the university which contains information about the school (address, university code), course and the department details, course duration, fees details along with living expenditure, and SEVIS number.
The repayment of the student loan for USA starts after the moratorium period (EMI holiday) or as soon as the person gets a job (whichever is earlier). But, the interest is charged even during the study period and moratorium period. The interest charged during the study period is Simple Interest whereas the one charged after this period is Compound Interest.
There are usually 3 modes of repayment-
SIMPLE INTEREST: Here, the borrower continues paying the Simple Interest during his study period. Hence, Simple Interest doesn’t keep on adding to the Principal amount and thus, the EMI is only the Principal amount+ Compound Interest.
PARTIAL SIMPLE INTEREST: In this mode, the borrower pays only a portion of the simple interest and the remaining interest keeps on adding to the principal amount. Hence, the compound interest is ultimately charged on the principal amount as well as the remaining simple interest.
EMI: In this case, the borrower doesn’t pay any amount till the end of moratorium period. Hence, the payments are made EMIs and the Compound Interest is charged on the Principal amount+ Simple Interest.