Study Abroad Loans 101

Choosing the right student loan can save you from excess debt.

Let’s categorize loans into USD and INR loans. For INR loans, you request an amount in INR and convert it to USD. In the case of USD loans, you both borrow and repay in USD. Many Indian banks, such as HDFC and SBI, offer student loans in INR, either collateral or non-collateral. Collateral involves land, an apartment, or some property, while non-collateral loans don’t require such assets. Typically, non-collateral loans have an interest rate of 1–3% higher than collateral loans. International vendors such as Leap Finance and Prodigy predominantly offer USD loans. These loans, whether collateral or non-collateral, tend to have slightly higher interest rates compared to INR loans.

How do you choose the right loan for you:

• For those with financial stability and property assets suitable for collateral, and if your university fees are not high, the INR collateral loan is a straightforward choice.
• If you’re not financially stable and have high tuition fees, consider opting for non-collateral USD loans. This is because if the USD rate rises against the rupee, there might be a shortfall in the amount needed to pay the tuition fee. Given limited financial support, I advise against taking unnecessary risks.
• If you don’t fit into both categories, it gets a bit tricky. If you have financial support from someone in India or the US and are dealing with a high tuition fee, you'll receive support even if there’s a rise in the currency conversion rate. In that case, opt for a Collateral INR loan. Alternatively, to play it safe, consider a USD Collateral loan.
• If your tuition fees are high with no financial support, and you believe you can secure a TA or RA position while keeping expenses in check, consider opting for a non-collateral INR loan. For added security, it’s advisable also to explore non-collateral USD loans.

The reason to stay cautious is that you wouldn’t want to encounter a shortage of funds in your account when it’s time to pay fees due to fluctuating conversion rates.

Repaying INR loans is quicker than USD loans. International vendors disburse USD loans faster than INR loans and eliminate the hassle of currency conversions.

If you wish to be self-reliant, plan to stay in the US, and are sure about securing a decent job, go for a Non-collateral USD loan, irrespective of tuition expenses and university.

Don’t hesitate to negotiate until the vendor is worn out. Being accepted into a top university provides a slight advantage, allowing you to leverage your admissions and profile in bargaining.

In all the mentioned scenarios, I was referring to fixed interest rates. Variable interest rates function similarly, but opting for a variable-interest loan may lead to a notable increase in the interest rate. Therefore, it’s advisable to always choose a fixed interest rate.

For my education funding, I decided to be self-reliant and selected a fixed-rate USD non-collateral loan from Leap Finance. Through negotiation, I was able to lower my interest rate by 2.2%.