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Calculating EMI for Overseas Education Loan

Majority of the study overseas aspirants are migrating to foreign country in search of quality education and high standard of living. International universities offer programs in almost all the fields at bachelors, diplomas, graduate certificates, masters and PhD level. Studying at a foreign university comes with a hefty cost attached to it. Hence, to finance an international degree from an overseas university, a lot of students avail an overseas education loan for studying abroad. After availing an overseas education loan, the repayment of the same begins once the student has secured a job i.e., after the completion of the moratorium period. Students are required to pay EMIs i.e., Equated Monthly Instalments during the repayment period of an education loan. 

Understanding EMI

EMI stands for Equated Monthly Instalments, a monthly payment that is required to be made for the repayment of overseas education loan. EMI includes monthly contribution towards both principal and interest on the loan amount. In the initial stages of paying an EMI, the interest component constitutes the major portion and as the borrower progresses along the loan tenure, the portion of interest payment reduces and the contribution towards the principal repayment increases.  

EMI can be simply explained as 

EMI = Instalment of Principal Amount + Interest

For both secured overseas education loans and unsecured overseas education loans, students are required to repay the loan amount through the monthly EMIs, within the loan tenure. 

The mathematical formula to calculate EMI is as follows: 

EMI = P × r × (1 + r)n/((1 + r)n - 1)

where P denotes the loan amount, r denotes interest rate, n denotes loan tenure in number of months.

Three Factors affecting EMIs

The EMI of education loan for higher studies abroad majorly depends on the three main factors i.e., loan amount, interest rate and tenure of loan. Let us understand these three factors: 

Loan amount: Loan amount is referred to the total amount that a study overseas aspirant borrows from a financial institution.  

Interest rate: Interest rate is referred to the interest charges on the amount borrows for an overseas education.  

Tenure of loan: Loan tenure is the agreed loan repayment time span between the borrower and the lender institution for the repayment of an overseas education loan.

Understand Overseas Education Loan Repayment Process in 5 steps:

1. Once the overseas education loan is sanctioned from the bank and is disbursed in the student’s or university’s account, the interest amount begins to deduct from the bank account of the co-applicant. 

2. The simple interest is charged only on the loan amount that has been disbursed. For an instance, if the amount of 15 lakhs is disbursed initially and 10 lakhs after the span of 6 months, the interest will be first charged on the 15 lakhs and after 6 months on the remaining 10 lakhs. 

3. After the completion of the moratorium period, applicants are required to pay the EMI to repay the overseas education loan. 

4. The education loan repayment can be done gradually as per the fixed EMI schedule or else applicants also have an option of paying the EMI all at once. 

5. If the student hasn’t paid the simple interest during the moratorium period then it gets accumulated with the education loan amount including the compound interest. Hence, the EMI is charged on the overall amount. 

How to calculate EMI?

EMIs of overseas education loans can be calculated with the help of a tool called as EMI calculator. An applicant is required to insert the principal amount, rate of interest and the loan tenure in EMI calculator that helps the borrower in effectively visualizing the amount that is required to be paid to the financial institution.  

On the specified date of each month, borrowers are required to pay the EMIs i.e., one-time fixed payment amount to the financial institutions. One of the many benefits of equated monthly instalment is that the borrower is aware in advance as how much amount he/she is required to pay and for how long. This provides a clarity to the borrower in knowing the amount required to pay each month towards their loan amount.

Understand EMI with an example:

An overseas education aspirant has borrowed INR 2,000,000 at 10.3% of ROI and the students is required to repay the loan amount in the time span of 15 years i.e., 180 months. Hence, the student will be paying 22,000 every month and the total amount will get twice the principal amount. However, on reducing the repayment tenure of an overseas education loan to 10 years i.e., 120 months, the applicant will be required to pay around 27,000 every month and the total interest paid on the loan will be 38.2% of the total amount. 

If we reduce the repayment loan tenure to 5 years, it can observed that the EMI increases to INR 43,000 and the total interest paid reduces to 22.5% of the overall amount. 

All of this is readily visualized in an EMI calculator tool by Elan Overseas Education Loans

4 Benefits of Using an EMI Loan Calculator:

An EMI calculator is a tool that can help applicants in planning an overseas education loan effectively. It displays the EMI that will be required to be paid on a loan amount. Given below are the 3 benefits of using an EMI loan calculator: 

1. Finance planning: Easy to plan on the budget more efficiently and hence borrow the required amount.

2. Easy comparison: Makes it convenient and easy to compare interest rates offered by different lenders.

3. Easy to use: Only put in your principal loan amount, tenure and education loan interest rate.

4. Ensures good credit score: Gives clarity on EMI payments that helps in maintaining a good credit history. 

Use the Simple, Convenient and Instant EMI calculator that makes the complicated calculations simpler and get in touch with ELAN Loans for any kind.

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