Applying for education loan for studying abroad? Here's a checklist for you

Education loan is one of the best ways to fund education independently. It helps students earn the self-made badge.

"These loans are designed to cover the holistic cost of education, including tuition fees, airfare, accommodation, living expenses, etc., which allows students to focus on their studies," said Rajesh Kachave, Chief Business Officer of Student Lending and Insurance Business at Avanse Financial Services, an education-focused non-banking financial company (NBFC).

According to Kachave, there has been a growing demand for education loans among students from cities such as Mumbai, Delhi, Hyderabad, Bengaluru, Chennai, Pune, Kolkata, and Ahmedabad, among others.

Additionally, there is an increasing demand for education financing from tier II and tier III cities as well. This preference is majorly due to the student-friendly environment, easy immigration policies, and promising professional opportunities offered by study-abroad destinations such as the US, the UK, Canada, Ireland, Germany, Australia, and more.

Education loans are a student’s initial step toward financial freedom because they are usually first-time borrowers. Therefore, thorough investigation and analysis are crucial for making a wise decision. Customers can now apply online or opt to apply for an education loan by visiting the lender’s office.

Online process: To apply for an education loan, students have to follow these steps:

Step 1: They need to fill out the application form online

Step 2: Speak to education loan consultants

Step 3: Send the requisite documents

Step 4: The student loan will be sanctioned, if students meet the set criteria

Offline process: If students prefer to apply physically, some lenders offer door-step services too.

"The entire application process is explained in detail, a list of required documents is shared, and the necessary documents are collected. Students are free to choose between online and physical application processes as per their preference," Kachave told CNBC-TV18.com.

Choosing the right type of loan and lender is crucial. So, diving headfirst into the first offer can lead to bad financing decisions.

Conducting extensive research is important when opting for a student loan.

"Students should utilise online resources and seek advice from acquaintances who have already opted for similar financing solutions, as this will enable them to identify the most suitable education loan," Kachave said.

To determine the appropriate loan amount, it is essential for a student to carefully examine the potential expenses involved when taking an education loan.

"Conducting thorough research can provide students with a better understanding of these costs. So, factor in all expenses beyond the tuition fees that will be incurred while studying abroad," Kachave said.

While considering a loan, students should ensure that it covers all costs associated with their education, not just tuition fees.

While a student plans to apply for an education loan, they must also start planning an effective repayment strategy simultaneously.

"They should discuss all the components of a loan, such as loan amount, tenure, repayment options, and EMIs, with the lender to design the best repayment strategy that suits their education loan journey ahead. When opting for a student loan, building an emergency corpus will be helpful to continue with EMIs under any unforeseen circumstances. When students repay a loan, they start to build their credit history. Students are at a crucial juncture where they will eventually need other financial products, and a healthy credit score will unlock multiple benefits when opting for these financial solutions," Kachave said.

Most student loans come with a moratorium period where students are exempted from paying their EMIs. This period varies depending on the financier. However, experts encourage students to make small contributions in the form of simple interest and partial interest.