Although studying in another country could be a life-changing experience, preparing for it is not simple. It is now possible to offer financial aid for students who are otherwise unable to study abroad because of a lack of funds. When looking into potential Overseas Education loan providers, students will likely become confused by industry jargon.
This page defines several of the most frequent terminologies associated with student loans in a way that is easy to grasp. The conditions described in this article for education loans in India can be applied to secured or unsecured loans. It is important to remember that the terms and conditions of Overseas Education loans may differ depending on the lender.
The following glossary and definitions are intended to provide a quick, casual understanding of some of the more technical terminology and phrases you may encounter while browsing our website.
Let's start by differentiating between India's two varieties of student loans.
Secured Student Loan
Secured Overseas Education Loans through collateral are called "secured" or "collateralized" loans. Collateral can be either a physical (e.g., a land plot, an apartment building) or a purely fictitious (e.g., an FD, a life insurance policy, or a government bond) asset.
Unsecured Student Loans
Unsecured Overseas Education Loans, sometimes known as "education loan for abroad studies without collateral," are those for which the borrower is not required to pledge any assets as collateral. Co-applicant's monthly income, credit history, intended school, major, and nation all approve this loan.
Terminology for Interest Rate and Loan Details for Higher Education
Accrued Interest: In the case of accumulated interest, the lender fronts the money, and the borrower is responsible for paying it back. The monthly interest is computed and added to the outstanding principal balance. You can calculate your interest with the help of an education loan for abroad studies EMI calculator.
Floating Interest Rate: This interest rate is called a "floating interest rate." It can change over a relatively short period. Banks, foreign lenders, and non-bank financial institutions widely use floating interest rates for education loans abroad.
Interest Rates are Fixed and will not change shortly; in addition, if interest rates change in the future, they will not affect students who have already taken out student loans.
Marginal Cost of Funds-based Lending Rate (MCLR): The interest rates most financial institutions impose on student loans are linked to the marginal cost of funds-based lending rate (MCLR).
APR (Annual Percentage Rate): The Annual Percentage Rate is a rate used to measure the cost of borrowing money each year. All charges and premiums related to the loan are included here. Interest rates from foreign lenders are often stated as annual percentage rates (APRs). One such foreign lender is Prodigy Finance.
Glossary of Terms for Student Loans
Principal Amount: The term "principal amount" refers to the direct loan amount, lenders give to borrowers, or the overall amount loaned out.
Interest Rate: Money given back to the lender in exchange for the use of their capital; expressed as a percentage per year. Foreign lenders in India often apply annual percentage rates (APRs) based on the LIBOR index, whereas domestic lenders use the Marginal Cost of Funds to Lending Ratio (MCLR).
Co-applicant/Co-signer: A co-applicant or co-signer applies for a student loan with the principal applicant. The loan borrower is responsible for paying back the loan if the applicant does not complete the program. Foreign lenders often refer to co-applicants in the form of co-signers. If you're applying for a student loan in India, you'll need a co-applicant member of your immediate family.
Guarantor: In the case of student loans, a guarantor is a third party, whose assets are pledged to the lender as security.
Education Loan Disbursement: Disbursement of an education loan refers to the process by which the lending bank transfers the loaned funds to the borrower.
Pre-visa Disbursement: Pre-Visa Disbursement Loans are given out as a way for students to secure their seat by making an initial deposit or first-semester tuition fee payment to the university/college before Visa.
Post-visa Disbursement: Post-Visa Disbursement Loans are given once the student got the visa approval or actual visa stamping on Passport.
Note that the pre-visa and post-visa disbursement depends on the norms of each country.
A Glossary of Secured Student Loan Terminology
Collateral: Asset pledged by a borrower as security for the loan. Real estate or liquid assets are the most common forms of collateral security for student loans.
Loan Margin: Margin money, or loan margin, refers to the portion of a loan that the borrower pays rather than the lender. The candidate's share of the total cost of higher education in the country of study plus any expenses incurred in India or abroad is referred to as the loan margin.
Terms Regarding Repayment of Student Loans
Loan Duration (Tenure): This value represents the total number of years over which student loans must be repaid. Candidates offered a loan with a 15-year repayment term have demonstrated an ability to afford the cost of their education over that time frame.
Amortization: Amortization is the process by which the total cost of a student loan, including interest, is paid back over time in regular instalments. This is the word most often used by foreign lenders to describe the phase of loan repayment associated with international student loans.
Moratorium Period: The period of education, or from the moment the loan amount is sent to the student’s account until the student has finished one year of his education or has completed 12 months after finding employment (whichever comes first), is referred to as the Moratorium Period. When the Moratorium period expires, the student must start making monthly EMI payments. Only the simple interest, which is considerably less than the EMI Amount, must be paid by him or his parent up to that point.
Grace Period (Job Search Period): The grace period is known as the time after a student's course has ended but before the ban is lifted. The bank gives a grace period if a student graduates from their program and is jobless. The grace period for most banks is six months and for some, it is one year. The length of this reprieve is entirely at the discretion of the participating lenders.
Deferment Period: A deferment period is when the lender postpones the borrower's need to repay the loan's principal.
Loan Waiver: Students who have been unemployed for a cumulative total of five years after completing their program of study may be eligible for debt cancellation. They should back up their requests when applying for loans with legitimate explanations. Forgiving a student loan is solely up to the lending institution.
Loan Write-off: The collateral used to secure a loan is "written off" when it no longer generates enough money to pay back its principal amount plus interest. Since the likelihood of the loan being repaid is low in this scenario, the bank will likely terminate the loan.
The above-mentioned terminologies that we tried to explain are still too heavy when it comes to understanding their meaning. Thus, we recommend contacting a transparent and trustworthy guide when it comes to getting an Overseas Education loan or any loan for that matter.
For Overseas Education Loans, we have a solution. Or rather you can call them, Solution Providers.
ELAN Loans. When you work with Elan's professional education loan consultants, you'll get quick and easy answers to all your inquiries and the financing you need to finance your study abroad. There is, therefore, no reason to wait. You can check your loan eligibility and get free lending assistance from us.