As an international student planning to study abroad, you should always evaluate the amount of money you’ll need to complete your program in the foreign country you plan to study.
Then you will have to research and apply for scholarships, school financial aid for international students from the school, and try and find money from other sources, including family funds.
After exhausting these avenues, most international students still have a funding gap, and that’s where international student educational loans are to be considered.
What is an International Student Loan?
Federal education loans are well-known by U.S students studying in the USA, but they are not available to international students. Instead, international students meet the criteria for international school loans, which is a specialized private education loans available to international students studying in places like U.K, Australia or U.S.A.
International Student Loans are now a very realistic way to finance your education in U.K, Australia, Canada and United States of America. Loans are very flexible, and can offer loans high enough to finish your entire education program, but, with extended repayment terms and reasonable interest rates involved, you can afford the repayment of the loan when you graduate.
All international students applying for loans must have a co-signer from that country you’re applying the loan before you are allowed to apply. A co-signer is legally obligated to pay back the loans if the borrower does not pay.
The co-signer should be a permanent resident of the country with a higher credit history/background, especially in a country like U.S the person should have lived in the U.S for the past 2 yrs.
The co-signer is usually a friend or relative who is able to help out in getting credit, because most international students cannot receive credit on their own.
Interest is the total amount charged by the lender apart from the amount of money that you just borrowed. The interest rate is “calculated based on an index plus” including a margin, which will add an additional percentage rate of interest determined by your co-signer’s creditworthiness. Two of the most common indexes often used for international students are the Prime Rate and LIBOR Rate.
Prime Interest Rate – This index depends on the government funds rate that’s set by the federal government of the country, for instance, in U.S this rate is set by the U.S federal government.
LIBOR – The LIBOR (London Interbank Offered Rate) is based on the British Bankers’ Association and is used on the London interbank market. The “interest rate is average of the world’s most creditworthy bank’s interbank deposit rates for overnight and one year terms”.
When you’re evaluating the borrowed loans, the creditor will clarify which index the plan uses. Then, you will have a different margin which will be added based on the borrower’s individual criteria, like the co-signer’s credit history.
Depending on their creditworthiness, an additional monthly interest rate will be added to the index. This would be the total interested you owe and need to pay back when the repayment starts.
Once your application is approved, your specific margin should be revealed to you, at which you can accept or reject the loan.
Repayment will be different with respect to the loan option you decide on. Because most international students are unable to work while they study in that country, repayment has to be considered very important feature in your loan.
You need to consider how much the monthly installments will likely be, when payments will start, and how long it will be possible to defer repaying the loan (If needed). The payment term generally varies from 10-25 years, but the larger the amount of the loan, the more time the repayment period.
The standard payment schedule option is:
Full Deferral – Students can easily defer payment up to 6 months after graduation, provided the student full-time status is maintained. Students can defer payments for at most 4 years, the actual duration of the program (degree).
Interest Only – International students only pay the interest whilst in school, up to four consecutive years, and can defer the principal of the loan until 45 days after graduation, or if the student drops their required course load to a part-time.
Immediate Repayment – Payments on both interest and principal are due immediately once the loan has been dispersed to the borrower.
What is the Maximum Loan Amount I Can Borrow?
You should be able to apply up to the total amount to complete your school program, minus other aid, as determined by your school. To find out exactly the maximum amount you can borrow, you will need to contact your school’s financial aid office. After you apply and receive credit approval for your co-signer, your school must certify the amount the loan should be.
Final Word: When the loan is used responsibly as part of a standard education funding plan, international student education loans can help to place an excellent education within reach, regardless of the financial circumstances of your family.
Do you have anything else to add to this article? Leave your comment below