How to Use Personal Loans for Your Child’s Study Abroad Program

Studying abroad has become a top choice for many students due to several reasons. Apart from access to high-quality education and unique academic opportunities, it also offers an opportunity for personal growth and enhanced career prospects. However, study abroad programmes can be costly, so it's important for students to plan their finances well in advance to ensure they have enough funds to cover all expenses.

In this article, we will explore how personal loans for higher education can help secure your child’s academic endeavours. We will also see some useful tips for using these loans wisely.

Importance of financial planning for study abroad

Studying abroad involves several costs such as tuition fees, living expenses, and travel costs. Planning lets you set a realistic budget and choose a programme that aligns with your financial resources. It also reduces stress and avoids surprises like exchange rates. Additionally, financial planning helps you make informed decisions about exploring funding options such as personal loans for education.

Benefits of using personal loans for study abroad

• Flexibility: Personal loans for higher education can help cover all kinds of costs, including tuition fees, accommodation, and travel expenses.
• No collateral required: Personal loans are unsecured, meaning you do not have to provide any collateral such as a property or a car to secure the funds for your child’s educational aspirations.
• Faster application process: Generally, getting approved for a personal loan is quicker than a traditional student loan, especially if you have a good CIBIL score and meet other eligibility criteria.
• Quick disbursement: Timely payment of tuition fees, accommodation deposits, and travel expenses is important, as there are generally deadlines in place. Personal loans generally come with quick disbursal times. For instance, at SMFG India Credit, the funds can be disbursed within 30 minutes* of loan approval.

Leveraging personal loans wisely: Tips and strategies

When considering personal loans for higher education, a strategic mindset is necessary. Here are some tips and strategies to help borrowers leverage personal loans wisely:

• Create a realistic budget and borrow only what you need so that you don’t strain your finances. Factor in tuition, living expenses, travel, and potential fluctuations in exchange rates. Also, consider options like scholarships or grants to ease the financial burden.
• Make sure you understand the total cost of the loan, including interest and associated fees such as processing fees and prepayment penalties.
• Develop a repayment plan before taking out the loan. Determine how much you'll need to repay each month and ensure that the amount fits within your budget. This should include your existing financial obligations, your savings goals, and any potential future expenses. Use an online EMI calculator to plan repayments effectively.

Factors to consider before applying for a personal loan

• Interest rates: Compare interest rates and associated fees across lenders to get the best option for a personal loan for higher education.
• Loan tenure: Personal loan repayment tenures typically go up to 60 months*. Choose a loan tenure that aligns with your financial comfort. Keep in mind that a longer tenure can reduce monthly payments but increase the cost of total interest to be paid. 
• Eligibility criteria: Make sure that you meet the lender’s criteria for age, income, credit score, etc. for greater chances of loan approval with lower interest rates.
• Debt-to-Income ratio: This ratio compares the monthly debt payments to the monthly income and helps lenders assess the individual's ability to repay the loan. Aim to keep the ratio below 30% for lenders to view your application more favourably.

How personal loans differ from other forms of financing?

Personal loans differ from other forms of financing due to a few reasons:

Flexibility

Unlike specific loans assigned for a particular purpose, like a home loan, personal loans offer flexibility in usage. Borrowers can utilise personal loan funds for a variety of purposes, such as debt consolidation, medical expenses, or higher education.

No collateral requirement

Personal loans are typically unsecured, meaning borrowers are not required to pledge any collateral, such as property or assets, to secure the loan. This aspect distinguishes personal loans from secured loans like mortgages or car loans, in which the lender has the right to seize the collateral in case of default.

Repayment terms

Unlike a traditional education loan, you can get a flexible repayment period of up to 60 months* with personal loans. However, the EMI payments start within 30 to 45 days of loan disbursement.

Conclusion

Studying abroad offers several advantages for personal and academic growth, but demands careful financial planning. Personal loans for higher education offer a flexible way to finance study abroad programmes, covering various expenses like tuition fees, accommodation, and travel.

At SMFG India Credit, you can avail of personal loans up to INR 30 lakhs*. With a streamlined online application process, you can get the funds within 30 minutes* of loan approval. Check our personal loan eligibility criteria and apply now!