Three Mistakes to avoid when taking an Education Loan

If you’ve landed on this page then probably you're planning for an education loan to fund your education abroad. Education loans give opportunities to students with restrained financial backgrounds to pursue their desired courses abroad and thus get job opportunities that wouldn't have been possible otherwise. But there are certain minute student loan mistakes that people tend to make and are unavoidable in nature. To know a few of such mistakes to avoid while taking an education loan, read this article till the end. 

So, there are steps involved when it comes to studying abroad like preparing for a test, applying for admission, arranging funds, and then going for a visa. Ironically, the least attention given to a factor that makes or breaks students' dreams is arranging funds, since the majority of students who drop their plan to study abroad are because of lack of funds.

The reason behind this could be, as there are test centers that help students in scoring good marks on tests like GRE, IELTS, TOEFL, etc. There are admission counselors who help students with the admission process and there are visa counselors helping students with the visa process preparation but we doubt there are that many organizations helping students with the loan process and aware of education loan mistakes, so students assume getting an education loan must be simple, all you gotta do is visit banks and get the loan done, and that's where they go wrong and make mistakes in education loan.

In this article, we'll take a closer look at some of the common mistakes students make while taking an education loan which can be easily avoided. Besides, you can also watch our video on the said topic embedded below, which is the 9th episode of our LoanFlix series on youtube.

This is a very common thought among students planning to study abroad that once landed abroad they'll get part-time jobs there, and so students apply for lesser loan amounts than actually required, eg if a student is going abroad for a two-year program and the tuition fees for two-years are 35 lakhs, and the living expenses for two years are 20 lakhs which sum up to 55 lakhs as a total loan requirement which means this student is eligible to get a loan up to 55 lakhs but since student assumes he'll get a part-time job and will manage for the second year,  the student only applies for some 25 to 30 lakhs, though they don't have the remaining amount with them.

It could be very risky just applying for half the amount instead of the total eligible loan amount because it is not guaranteed that students will get part-time jobs, this year there were so many students who couldn't get part-time jobs because of the pandemic.

So ideally, students should apply for their total loan requirement, for eg, if the total loan requirement is coming up to 55 lakhs then apply for 55 lakhs, later if students get part-time jobs and don't want to disburse the remaining amount from the sanctioned loan amount, lenders will be fine with that. And most importantly you only pay interest on the disbursed amount, not the sanctioned amount.

Yes, there are banks that can process education loans within 5 days but their rates of interest are very high from around 10% to 14%. And banks with lower rates of interest of around 8% to 9% take longer to process an education loan. 

So, as we know that there are two types of loans students can get for their education i.e collateralized loans where mortgaging a house, flat, and non-agricultural land requires legal and valuation by the bank's assigned lawyer which may take weeks, and months for the entire loan process. And to get a non-collateral education loan students don't need to have collateral but a good financial co-applicant with a stable earning source. 

Taking an education loan on collateral may take time but their rates of interest are low and this is where students make education loan mistakes by not starting their loan process early, waiting till the deadline arrives, and then panicking and accepting offers by private lenders at much higher rates of interest. A difference of even 0.5 % in ROI can make a huge difference in the long run. 

You can apply via WeMakeScholars as we can speed up the loan process by effectively coordinating with the bank's loan processing department.

The students who fall for this mistake are mostly those whose parents are in charge of arranging the loan. So, parents may have an acquaintance with some bank's branch manager and so they completely rely on just that bank because of the manager. Also, students from rural areas where not many banks are present leave them with just a few options. 

It is a bad plan to just stick with one lender because what if for some reason lender rejects your loan application at the last moment? Plus when taking an education loan with just one lender, students didn’t get the better options, like 9 out of 10 students in such cases could get a better deal in terms of the ROI with other lenders. These are a few mistakes to avoid while taking an education loan that can make a huge difference in the entire education loan process experience. 

These are the 3 most common student loan mistakes which can be easily avoided and students should take help from WeMakeScholars as we work with 14+ banks and NBFCs, and we try our best to get students the best deal they can get. So do reach out to our financial officers by requesting a callback. Our team of financial officers assists you with the entire education loan process until sanction, disbursement, and beyond. 

Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 14+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it's free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, and France among others.