Taking education loans to study in an overseas educational institution is one of the aspirants' most sought-after funding choices. The most beneficial aspect of an education loan is it covers all kinds of study expenses. Thus, taking care of the financial responsibility while the student can focus on academics.
While education loans are usually a boon, they can easily turn into a bane. You might be contemplating how is this possible. To clear out the air of doubt, you must know that the role of your loan provider plays a very significant role in this regard. After your loan sanction and disbursement, if you are not happy with the services of your loan provider, then you can consider transferring your education loan.
However, while deciding on your new loan provider, you need to consider a lot of aspects and conduct thorough research on their terms and conditions regarding education loan transfer. To help you make an informed choice, we are here to guide you through the concept of "Education Loan Transfer".
In this article, we will provide a comprehensive guide to education loan transfers, including all the nuances and a detailed step-by-step process. So, let’s deep dive into this article to learn more about transferring education loans.
As the term rightly indicates, education loan transfer is a process of transferring your student loan from one lender to another. In most cases, loan applications prefer to transfer their loans due to higher interest rates, unresponsive staff, unfriendly repayment policy, etc.
Despite having the option of transferring a loan, there are various parameters that need to be considered before you apply for an education loan transfer. Let’s discuss more of this ahead.
1. Lower Interest Rates: One of the primary reasons for seeking an education loan transfer is the potential to secure the lowest interest rate for education loan abroad. Reduced interest rates can significantly ease the financial burden, making repayment more manageable in the long run.
2. Extended Loan Repayment Tenure: Education loan transfers offer the advantage of extending the loan repayment tenure. This can be a rescuer for students facing the prospect of high monthly repayments.
3. Education Loan Subsidies Under Government Schemes: Many financial institutions offer subsidies, concessions, and interest rate reductions under government schemes designed to support higher education. By transferring your education loan, you may gain access to these valuable benefits, further reducing the cost of your education.
As per the different circumstances, education loan transfers come in various arrangements. Here are the four primary types of education loan transfers.
1. Secured to Secured: In this type of loan transfer, a student with a secured loan moves the loan from one financial institution to another.
2. Secured to Unsecured: In cases where a student with a secured loan decides to transfer to a lender offering an unsecured loan, it becomes a secured to unsecured transfer. This transition eliminates the need for collateral security.
3. Unsecured to Unsecured: Students with unsecured loans who decide to switch to another lender offering unsecured loans opt for an unsecured-to-unsecured transfer.
4. Unsecured to Secured: When a student with an unsecured education loan (lacking collateral security) chooses to transfer to a financial institution offering a secured loan, it involves an unsecured to secured transfer.
Education loan transfers offer several advantages, making them an attractive option for international students. Some of the leading benefits are listed below.
1. Lower Rate of Interest: Perhaps the most significant benefit is the potential for a lower interest rate. This can lead to substantial long-term savings and reduce the need to pay higher interest amounts.
2. Extended Loan Repayment Tenure: Transferring your education loan for abroad studies can allow you to extend the repayment tenure. This permits you to have a longer payback duration and makes your monthly payments more manageable.
3. Education Loan Subsidies Under Government Schemes & Tax Benefits: Government schemes and programs may provide subsidies or interest rate reductions, girl child concessions, and income tax benefits under section 80E to students availing education loans.
Considering that now you know a lot about this concept of education loan transfer, let’s proceed to know the specifics.
To be eligible for an education loan transfer, you should typically meet the following criteria.
1. Be a Current Education Loan Borrower: You must have an existing education loan that you wish to transfer.
2. Good Repayment Track Record: Maintain a good repayment track record with your current lender to demonstrate your creditworthiness.
3. New Lender's Eligibility Criteria: Fulfill the eligibility criteria set by the new lender, which may include academic progress and financial stability.
4. Arrange Appropriate Collateral Security: If you are transferring your unsecured loan to a secured loan, then make sure that you have the collateral security documents ready as per the norms of your new lender.
5. Complete Required Documentation: Ensure that you complete and submit all necessary documentation as per the new lender's requirements. These documents may include your loan application, academic records, and financial statements.
Once you understand your eligibility, consider the following factors before you commence with your loan transferring process.
1. Interest Rates: Thoroughly compare the interest rates offered by your current and potential new lenders. In most cases, the primary goal of transferring your education loan is to secure a lower interest rate, so conduct in-depth research to identify the most advantageous option.
2. Processing Fees and Other Charges: Assess any processing fees or charges associated with the transfer. These fees can vary between lenders and impact the overall cost-effectiveness of the transfer. Make sure you understand all the costs involved and are willing to bear these costs.
The process of transferring your education loan abroad is a multi-step procedure. By following these detailed steps, you can ensure a smooth and successful education loan transfer.
Step 1: Approach Your Current Financial Lender for Loan Foreclosure
Initiate the process by contacting your current financial lender to express your intention to transfer your education loan. Request loan foreclosure, which means closing your existing loan account.
Step 2: Apply to the New Financial Lender for your Education Loan Transfer
Shortlist options of lenders that provide the services of education loan transfer. Contact the most suitable financial institution where you wish to transfer your education loan. Submit the necessary documents and complete the application for the loan transfer.
Step 3: Discuss and Arrange All Required Documents
Talk with the new lender to ensure that all necessary documents and paperwork are complete and in order. These may include your loan application, academic records, financial statements, details of previous loan disbursement, and additional documents specified by the new lender.
Step 4: Clear All Outstanding Amounts with the Previous Lender
Upon approval of your loan transfer, ensure that you settle all outstanding amounts with your previous lender. This step is significant for the loan foreclosure process, which allows the lender to release your original documents.
Step 5: Foreclosing Your Existing Loan
Once you have paid off the outstanding balance, your previous lender will issue a foreclosure certificate and release all the original documents associated with your loan.
Step 6: Submitting Documents to Your New Lender
Provide the new lender with the foreclosure certificate and other required documents. Your new lender will then conduct a thorough review to ensure everything is in order. After verifying these documents, they will create your loan account and take over the charge.
By following these six steps diligently, you can effortlessly and successfully switch your expensive education loan.
The time required for the entire education loan transfer process can vary depending on various factors such as the lenders involved, completeness of documentation, and the efficiency of the financial institutions. Generally, it is advisable to initiate the transfer well in advance to ensure a smooth transition and avoid any last-minute hurdles.
Summing up this article, this is everything that you must know in regard to education loan transfers. A well-executed education loan transfer can be a monumental step forward for your international education journey.
If you're interested in exploring this concept further and seeking expert guidance for your education loan transfer, consider reaching out to our team of specialists at ELAN Overseas Education Loan. We can provide invaluable insights and assistance throughout the process. So, connect with our team in person or online to get free online counselling for study abroad loan.
By carefully considering your options and following the detailed step-by-step guide provided in this article, you can make your overseas education loans more manageable.