Planning to study abroad but no financial planning? We are happy to help you!

Going overseas for higher education is quite a common trend now. But as common as it is, going abroad for further studies is equally expensive and can literally burn a hole in your pockets. While most banks are willing to offer education loans for higher studies, but is it enough for us to just sign the documents without any planning?

BI India lists down a few tips for a better financial planning before you go overseas for your higher education.

Scout for the best loan option

It is a tedious job but it is extremely important for anyone to go through and compare the various loan options available to you. And once, you zero in on the offer that you feel suits you, you can negotiate the terms and conditions.

Read the document carefully

Understand your loan’s terms and conditions and then sign the papers. There are times when your EMIs have to be paid immediately after you complete your higher education, unlike in most loans where the EMIs start only after six months or more of course completion.

Remember fluctuating rupee

It is important to remember that fluctuation in rupee value will impact your loan. One must remember that the loan will be rupee denominated and hence on conversion into your desired foreign currency, the amount will be lower.

“A student has to be prepared to bear this foreign exchange risk. For example, a student applies for an education loan of Rs 20 lakh. However, if the rupee weakens further due to exchange rate fluctuations, there would be an increase in the cost of education from the rupee perspective,” said Harshala Chandorkar, senior vice president, Consumer Services at CIBIL.

Plan your course of action

In most cases, parents often sign up as a guarantor for the loan availed by you. So, its better to plan your course of action beforehand because if you delay the EMIs or default on them, it will adversely impact their CIBIL report as well.

“Rupee depreciation also adds to the woes of many parents who fund their children’s education from their savings as they have to shell out more money. As a guarantor on your education loan your father / mother is liable for its repayment in case you fail to pay the EMIs. His / her credit report will show the details of this education loan and defaults will also show if you do not repay the EMIs on the loan. Thus, your repayment behavior will also impact your parents’ credit score,” she added.

Spend carefully

While you are overseas, pursuing your higher studies, it is important to do budgeting and know how much can you spend. Becoming a spend thrift can put additional burden on your financials, thus forcing you to delay or default on your loan repayments, negatively affecting your CIBIL report. In case, you cannot avoid certain expenses, consider taking up a job to meet your additional expenses.

“If you have taken a loan to study abroad, timely repayment should be the top most priority. Like any other loans and credit cards, education loans are also reported to the CIBIL and get reflected in the borrower’s CIBIL Report. Transactions related to repayment of your education loan will also get reflected in your CIBIL Report and impact your CIBIL Transunion Score. Irregular or non-repayment of EMIs on your education loan will lead to an unhealthy CIBIL Report which can hamper your chances of availing any other loan or credit card in the future,” said Chandorkar.

Negotiate

This should be your last resort if you find repaying the loan difficult. Try negotiating with your banks for increasing your loan term or lowering your EMIs. “With the impact of rupee fall, one can also ask for further loan from banks. Recently banks have also introduced top-up scheme for education loans where they fill the gap created by the exchange rate fluctuation. This will certainly increase the payback amount but it will help students continue with their studies,” she noted.

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