With the admission session to foreign universities being just around the corner, you are fully geared up to crack through all the admission gateposts and secure a place in your dream institute. And finance, well - you know it pretty well - you apply for education loan.
And, with majority of Indian students preferring US, Canada, Australia and UK, as their study destination, despite the political conditions prevailing in US and UK, a vast sum of money is pumped into their economy, which is financed by our financial institutions.
Well, the cause of concern begins much later - i.e. after the action has already been done. And practically, that's the reason why - both students and the financial institutions that give loans and advances are in stress.
Several reports reveal that the banks and NBFCs lending education loans are finding it hard to manage the surmounting percentage of NPA in this segment. The rising NPA is indeed a burning issue - on top of that, with almost no proper frame work to assess the return on investment, banks are finding it hard to manage this segment. With the prevailing political and economic conditions
in most countries abroad, merely good grades of a student and at times even a sound work experience doesn't help one in securing a good job to stay back.
Most education loans are given without collateral. So, banks are not even left with the option of selling away the collateral security and adjusting it against the loan. And, with many leaving the country, actually forever - tracing them down for the sake of repayment becomes a task almost impractical at times.
So, how are the students effected. Well - in many ways actually. And the biggest setback is - lowered credit score, which comes in way of securing any further loan from financial institutions even if an emergency arises. Imagine you need money for medical expense and at that moment, you would have to apply for loan to meet with the costs. You go to bank, already panicked and stressed. And you face rejection, due to poor credit score. Or, may be you have a tiff with your landlord and decide to buy a house that very day. Coincidentally, you even find one which you desire to call your dream home. You are in urgent need of possession and you go to bank with your loan application only to receive a 'NO' as answer.
Very disappointing indeed, isn't it.
So, how to find a solution to it.
Well - there are ways.
1. Have a word with the bank regarding repayment at the initial stage - i.e. while your loan application has been accepted. And, propose this form of repayment -
''Usually in abroad every one - with or without loan does a part time job. You save money right from 1st month and every half year or quarter (which ever is suitable for you) you begin repayment. However, this can be irregular depending upon the nature and tenure of your part time. And once your tenure is over, offer pay back in instalments (EMIs), and request for smaller EMIs if you are unemployed. "
2. While you do part time abroad, remember two vital things - a) you should learn the art of saving in your piggy bank. b) you earn in euro and the repayment of loan is in rupees.
Strategize accordingly, and you will find that you have paid quite a part of your loan. A simple help to get you sorted -
You get a part time for as minimum as say, 10 euros an hour. And, you work 3 hours a week everyday.
So, 10(euros)*3(hours)*7(days)*30(weeks) = 6300 euros = INR 5,33,650 approx. (value changes according to exchange rate)
You already have taken loan for living so, this money or entire money need not be spent on living expenses.
Deposit it in a local bank that pays interest (do check with the banks for their interest rates and liquidity positions). Assuming 4% interest rate during half year, you will have earned 510000 INR approx. Save INR 1,00,000 from it, keeping the rest for bulk repayment like -
Say your loan is of INR 50,00,000. You chose to repay INR 4,00,000 in bulk. So, after repayment, you have - 46,00,000 INR approx. + interest accrued to be repaid in remaining 3 parts assuming the rate of interest is 10% on your loan. At the end of your 2 year study, you will be left with approx. 35 lacs to repay. And now, you still have the remaining amount (4,00,000 + interest) in your account to negotiate for EMI, even if you do not have a job immediately.
3. Banks should look at the earning potential of a candidate - not in terms of marks rather, in terms of work experience combined with whether that work experience would be relevant in the economy where the student is headed to. The hard fact is - every topper is not the top choice of recruiters, either due to mismatch of skills or due to the bare fact that the prevailing ruling party makes it hard for companies to hire talent from offshore.
4. Students, please choose wisely, regarding, where from you wish to obtain your funds. Choose a bank which - a) charges the lowest interest rates,
b) is flexible enough with repayment options.
5) There are many companies which provides sponsorships to employees to pay-off their loans and in the US, this is being used increasingly as a marketing tool to attract student pool for job applications.
Try to get these jobs. You will find a good list of these companies here -
https://studentloanhero.com/featured/companies-that-pay-off-student-loans/
With these tips in mind, the education loan will cease to be a nightmare any longer.
Till next, Stay tuned.
Well, the cause of concern begins much later - i.e. after the action has already been done. And practically, that's the reason why - both students and the financial institutions that give loans and advances are in stress.
Several reports reveal that the banks and NBFCs lending education loans are finding it hard to manage the surmounting percentage of NPA in this segment. The rising NPA is indeed a burning issue - on top of that, with almost no proper frame work to assess the return on investment, banks are finding it hard to manage this segment. With the prevailing political and economic conditions
in most countries abroad, merely good grades of a student and at times even a sound work experience doesn't help one in securing a good job to stay back.
Most education loans are given without collateral. So, banks are not even left with the option of selling away the collateral security and adjusting it against the loan. And, with many leaving the country, actually forever - tracing them down for the sake of repayment becomes a task almost impractical at times.
So, how are the students effected. Well - in many ways actually. And the biggest setback is - lowered credit score, which comes in way of securing any further loan from financial institutions even if an emergency arises. Imagine you need money for medical expense and at that moment, you would have to apply for loan to meet with the costs. You go to bank, already panicked and stressed. And you face rejection, due to poor credit score. Or, may be you have a tiff with your landlord and decide to buy a house that very day. Coincidentally, you even find one which you desire to call your dream home. You are in urgent need of possession and you go to bank with your loan application only to receive a 'NO' as answer.
Very disappointing indeed, isn't it.
So, how to find a solution to it.
Well - there are ways.
1. Have a word with the bank regarding repayment at the initial stage - i.e. while your loan application has been accepted. And, propose this form of repayment -
''Usually in abroad every one - with or without loan does a part time job. You save money right from 1st month and every half year or quarter (which ever is suitable for you) you begin repayment. However, this can be irregular depending upon the nature and tenure of your part time. And once your tenure is over, offer pay back in instalments (EMIs), and request for smaller EMIs if you are unemployed. "
2. While you do part time abroad, remember two vital things - a) you should learn the art of saving in your piggy bank. b) you earn in euro and the repayment of loan is in rupees.
Strategize accordingly, and you will find that you have paid quite a part of your loan. A simple help to get you sorted -
You get a part time for as minimum as say, 10 euros an hour. And, you work 3 hours a week everyday.
So, 10(euros)*3(hours)*7(days)*30(weeks) = 6300 euros = INR 5,33,650 approx. (value changes according to exchange rate)
You already have taken loan for living so, this money or entire money need not be spent on living expenses.
Deposit it in a local bank that pays interest (do check with the banks for their interest rates and liquidity positions). Assuming 4% interest rate during half year, you will have earned 510000 INR approx. Save INR 1,00,000 from it, keeping the rest for bulk repayment like -
Say your loan is of INR 50,00,000. You chose to repay INR 4,00,000 in bulk. So, after repayment, you have - 46,00,000 INR approx. + interest accrued to be repaid in remaining 3 parts assuming the rate of interest is 10% on your loan. At the end of your 2 year study, you will be left with approx. 35 lacs to repay. And now, you still have the remaining amount (4,00,000 + interest) in your account to negotiate for EMI, even if you do not have a job immediately.
3. Banks should look at the earning potential of a candidate - not in terms of marks rather, in terms of work experience combined with whether that work experience would be relevant in the economy where the student is headed to. The hard fact is - every topper is not the top choice of recruiters, either due to mismatch of skills or due to the bare fact that the prevailing ruling party makes it hard for companies to hire talent from offshore.
4. Students, please choose wisely, regarding, where from you wish to obtain your funds. Choose a bank which - a) charges the lowest interest rates,
b) is flexible enough with repayment options.
5) There are many companies which provides sponsorships to employees to pay-off their loans and in the US, this is being used increasingly as a marketing tool to attract student pool for job applications.
Try to get these jobs. You will find a good list of these companies here -
https://studentloanhero.com/featured/companies-that-pay-off-student-loans/
With these tips in mind, the education loan will cease to be a nightmare any longer.
Till next, Stay tuned.
Well thought subject
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