Whether to take an education loan in INR or US dollars for studying abroad?

Financing your study abroad destination is a significant investment, and making the right financial decision is crucial. There are several funding options available that help international students manage their education and lead a decent lifestyle abroad. For students who pursue their higher education from foreign universities, one of the biggest decisions to make is whether to take an education loan in INR or US dollars for studying abroad. While they need to consider a lot of factors, such as interest rates and processing fees, knowing everything about the Annual Percentage Rate (APR) is a must to make an informed and correct decision.

This Story also Contains

1. Which Institutions Offer Education Loans to International Students?
2. What is APR?
3. What is the role of the annual percentage rate (APR) in education loans?
4. Difference between INR and USD Education Loan

In this article, we will discuss more about USD vs. NR education loans, focusing more on the role of APR in understanding the true cost of borrowing. In addition to this, we will also cover the pros and cons of each option, currency fluctuations, and tips to manage your loan effectively.

Which Institutions Offer Education Loans to International Students?

When talking about education loans, you may come across a number of lenders, like banks, NBFCs, and other international money lenders. Banks have always been a traditional choice when it comes to taking loans. However, with time, new institutions have also come into the scene. The main complexity arises when international students get to know that the international lenders offer loans in foreign currencies, such as USD. Following are some of the most popular institutions offering education loans to international students:

Banks

In India, there are several banks that offer education loans to students. Public sector banks, such as SBI and UBI, that require them to submit collateral documents and offer loans at a lower rate of interest. Private banks, such as ICICI, IDFC, and Axis banks, offer both collateral and non-collateral loans.

NBFCs

There are several NBFCs in India that also offer education loans to students going abroad for higher education. NBFCs such as HDFC Credila are known for their flexible repayment options and have become popular in recent times.

International Student Loan Providers

Amidst the traditional lenders, such as the banks dominating the education loan landscape for students, international student loan providers are growing quickly. Some of the key players in this industry include Prodigy Finance, MPower, and Avanse Global Power.

Let us discuss each of these:

Prodigy Finance: This is a great option for students studying in countries like the US, UK, Canada, Australia, Italy, Germany, Singapore, and Spain.

MPower: This international student loan provider funds foreign currency for students studying in the US and Canada.

Avanse Global Power: Avanse Global Power offers funding to students who opt to study in USA.

While the banks and NBFCs provide education loans in INR, the international student loan providers provide education loans in USD.

What is APR?

Annual Percentage Rate (APR) in an education loan is the total yearly cost of borrowing. This includes the interest rate and all the other costs associated with the loan. Lenders understand the true cost and get an in-depth comparison between the different loan options available. It helps to decide the most cost-effective loan option. So, APR becomes a crucial factor for deciding whether to take an education loan in INR or USD.

What is the role of the annual percentage rate (APR) in education loans?

Some of the importance of APR is listed below:

• It gives a comprehensive cost of the loan amount.

• APR offers transparency

• It serves as a comparison tool

• It helps in making an informed decision

• It helps in financial planning

Let us understand how APR works. Suppose you have taken an INR education loan from a private bank (co-signer) at a 12% interest rate. This rate of interest is variable, and there are chances that it may increase in the future. Forex charges of 2-6% will be added when this amount is transferred to the university and also when you start earning in USD and pay monthly interest to repay the loan. Additionally, there will be insurance, making it 2-8% more. Also, there will be an application fee ranging between 0.5 and 2% on this amount. Considering all these, the APR can reach up to 16%.

Difference between INR and USD Education Loan

Let us understand the difference between INR and USD education loans for students and how APR matters in this situation. Let us assume that the student has taken an INR loan from a private bank (co-signer) and the USD loan from MPower.

As shown in the table above, it is important to look beyond the nominal interest rates. With an understanding of APR, you get a comprehensive view of the total cost of borrowing that includes all the fees and additional charges. So, this provides you with an accurate picture of the total cost that you will have to pay. When you understand the true value of each loan through the spectacle of APR, you will be in a better position to make an informed decision.