How to pick a study-abroad loan amid weak rupee, tougher work visa regime
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar said families should stress-test repayment against Indian salaries, borrow conservatively and avoid putting key assets such as homes at risk. He also flagged often-missed costs, including inflation abroad, currency swings and initial deposits.
What Abhishek Kumar said
How should a family decide how much to borrow for a study-abroad course?
I suggest stress-testing repayment against the salary the student could earn in India, not against foreign pay levels that may be inflated. If work opportunities after the course shrink, the student may end up repaying a large foreign-currency loan out of a lower Indian income. So borrow conservatively, and do not put key assets such as the family home at risk.
Which courses find it easier to get an education loan approved?
Lenders see a lower risk of default in STEM programmes and business degrees from highly ranked institutions. Because of that, such courses tend to get loans sanctioned faster and at lower interest rates. In my view, families should keep this in mind when comparing offers, since the course and the institution shape the terms a lender is willing to give.
What costs do families tend to miss when planning a loan for studying abroad?
A frequent mistake is ignoring local price inflation over the several years of the course, and the hidden effect that exchange rate movements have on disbursements still to come. Families also tend to underestimate the costs at the start, such as refundable security deposits for housing, visa processing fees and a reserve for emergencies. I suggest counting all of these when you work out the loan amount.
How much margin money do I need for a foreign education loan?
It varies with the lender. For foreign education loans from public sector banks in India, the margin money required is typically 15 to 25 per cent when the loan amount is above ₹4 lakh. On the other hand, many private lenders offer loans with no margin money at all for highly ranked global universities, so the margin you need depends on where you borrow.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on debt and loans
Amid a weaker rupee and tighter work visa rules abroad, the article explains how students and families can choose an education loan for overseas study. It covers rupee and foreign currency loans, lender criteria, hidden costs, margin money, fees, moratorium interest and the importance of repaying on time.
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How to pick a study-abroad loan amid weak rupee, tougher work visa regime