When Indian banks reject your Masters abroad study loan

When Indian banks reject your Masters abroad study loanFinally received your admit letter for your dream Masters programme abroad? Congratulations! All that hard work paid off! After all the hard work and a long, anxious wait, you can almost breathe a sigh of relief.

But, then there is the cost

Perhaps the biggest stumbling block you’ll face now is the steep cost of a masters abroad.(Just keep reminding yourself that it’s an investment in your future… because that’s exactly what a masters abroad is.)

The total cost of attendance can exceed US$40,000 – including tuition fees and living expenses. Depending on the programme, it can be even more. Given the high cost of a Masters abroad, many students look at educational loans to fund their education.
 

Study abroad education loans from Indian banks

Popular choices for study loans in India are local banks. A number of Indian banks offer education loans for students seeking to study their Masters abroad. It’s an obvious choice; these banks are established brands in the Indian lending industry and highly trusted by the public.

Students consider a loan from SBI, or any other national bank, one of the most trusted bets. These banks are backed by the Government of India and have funded many Indians in the past, who have successfully completed their Masters and repaid their loans.

However, when applying for a loan from these banks, it’s important to remember that every lender and borrower is different. Not everyone is offered the study loan of their choice. Sometimes local bank loans are unobtainable for one or several reasons:
 

1. Collateral

In most cases, Indian Banks do not offer unsecured loans; they require a property mortgage or other assets to back loan commitments. And, loans are extended only upto the value of the assets put up with the bank.

However, many aspiring students aren’t in a position to provide such assets. These financial products are out of reach for students from modest backgrounds.

Often, families contribute their assets to secure the loan for the student. While the financial liability is no longer restricted to student,they could affect the future of the entire family. Moreover, there is a significant opportunity cost to putting up collateral; sometimes the assets could be used for other, more productive, purposes.
 

2. Co-signer

Indian Banks assess various factors to establish your credit potential, including your parents’ standing. Masters students have a high post-grad earning potential, but are still considered high-risk by banks because of their modest family background.

This creates an uneven playing field in the educational loan market where students who need financing the most must pay a premium to study their Masters abroad. In some cases, banks may refuse to extend loans after studying your family financial history, independent from your admission to study at a top international school.
 

3. Education Loan Size

Most Indian banks don’t offer the complete cost of attendance required to cover full tuition fees and living expenses. The loan size limit for banks such as SBI is 20 lakh INR. When students do not have other financing to supplement their education loan, they are unable to pursue their Masters abroad as the offer doesn’t sufficiently meet needs.

There are other options, though, and admitted students should consider all of them before closing the door on a Masters abroad.
 

Scholarships for Masters Degree abroad

There is no better money than free money, and education scholarships are free money. Actually, they’re an investment by others that allow you to receive the education you deserve.

Scholarships effectively reduce your cost of attendance and make studying abroad an easier financial decision. There are chiefly three sources of scholarships:
 

a) University Financial Aid Office

Nearly every school offers Financial Aid to students. Their primary responsibility is helping deserving student to fund their degrees. Visit your school’s financial aid page to understand various scholarships options and criteria. And, if you have questions, don’t hesitate to get in touch directly.
 

b) Government Organizations

A number of government organizations offer educational scholarships to support the international movement of students. To find these scholarships, research for options in your school’s country and in India. Again, each scholarship has unique criteria, so research carefully before applying.
 

c) Philanthropic Organizations

Education is important and many philanthropic entities across the globe work to support students that can demonstrate financial need as well as merit. Foundations responsible for providing these philanthropic scholarships often have details descriptions of requirements on their website and you may need to perform your own search as they don’t generally work with specific schools, but rather towards educational aims.
 

Private Lenders

There are also private lenders providing education loans to students to study abroad. They are not traditional banks and usually specialize in the industry of education loans.

Be wary of these providers as some do not command the same credibility as your trusted local bank. There are two types of local, private lenders:
 

a) Lenders in India

These providers often ask for collateral, and when they offer unsecured loans to students, the interest rates are usually exorbitant.
 

b) Lenders in Host Countries

These lenders require a local resident to co-sign the loan agreement. If you have a local co-signer, it’s better to work with an established bank in the country of study than an independent lender.
 

Alternative Sources

Sometimes, even with these options, none of them offer financing that work for international students.

Do not let that stop you!

Many students face incredible hurdles when financing a Masters abroad – and they make it work. Some of the best examples come from MBA students who crowdfunded their education. The concept isn’t new to Indians, as ‘crowd-sourcing’ from family and friends is a cultural norm based on strong familial ties.

The concept of crowdfunding education has been taken to a new level by companies like Prodigy Finance. The founders of this company experienced difficulties obtaining financing to study their Masters abroad and created a platform that enables international students to secure study loans at competitive rates.

Each funding avenue, from scholarships and savings to loans, is part of the picture for students pursuing a Masters abroad. It takes time to investigate each one and to secure all of the financing needed.

But remember that education is an investment, not a spending spree. And, with all you’ve done already to earn a seat in a top programme, you should allow the feeling of success guide you rather than the rejection by your local bank. Because, there are other options and you will find the right one for you.
 


Rishabh GoelAuthor Bio: Rishabh Goel is an Associate Relationship Manager at Prodigy Finance. He studied Economics & Engineering at BITS & Masters at London Business School. He has helped Indians excel at GMAT/GRE and mentored students to attend top schools globally. Rishabh is passionate about borderless FinTech, previously working at TransferWise. He is a Sachin Tendulkar fan and would do (literally!) anything to have a coffee chat with him.

This article is part of CrystalConnect, an outreach initiative by MBA Crystal Ball.


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Prodigy Finance
Prodigy Finance is the pioneer of community-based student financing. To date, the company has funded students from 115 countries with repayment rates in excess of 99%.

14 Comments

  1. Victor says:

    Hi prodigy,
    What are the real penalization, If someone receives your credit loan and can’t pay it?

    • Rishabh Goel says:

      Hi Victor,

      Thank you for your interest in Prodigy Finance.

      Great question!
      As a community-lender, our borrowers are able to leverage our network of graduates from top schools through Prodigy Finance initiatives such as Job Boards, Mentorship programmes, Mixers among other efforts. We have a repayment rate of 99%, which is one of the highest in education loan providers.
      In extreme cases, we are happy to restructure your repayment process to accommodate personal crises.

      However, if you are a wilful defaulter, Prodigy Finance has the authority to move to the Indian Judiciary. We have a precedent where we won a case in High Court against a wilful defaulter.

      Happy to answer any further queries.

  2. vrinda says:

    Hey Rishabh,I am vrinda..planning to MS at USA..i wanted to know do you provide loans without assets ?

    • Rishabh Goel says:

      Hi Vrinda,

      Thank you for your interest in Prodigy Finance.

      Yes, Prodigy Finance indeed offers loans without any assets or any co-signer. We work closely with schools to understand your ‘future affordability’ to repay back the loan. This depends on the skills gained while studying to attain a higher-paying job after your Masters.

      Best of luck for your applications for MS in US,
      Rishabh

  3. athul says:

    Hi,I am looking forward to pursue an MBA from BIMS UAE,am I eligible for loan?

    • Rishabh Goel says:

      Hi Vrinda,

      Thank you for your interest in Prodigy Finance.

      Unfortunately we do not have a loan program in place with BIMS UAE. Our aim is to support international students joining the top 100 schools in Business, Engineering, Law and Public Policy. We’re now speaking with many of these schools to build partnerships for the classes starting in 2017.

      Best wishes,
      Rishabh

  4. sourav maity says:

    Hey Rishabh,this is Sourav planning to peruse Ms in finance in US… .Am I eligible for loans?

    • Rishabh Goel says:

      HI Saurav,

      Thank you for your interest in Prodigy Finance.

      Yes, we do support Indian students pursuing MS in Finance in American schools. Prodigy Finance supports top 100 FT MBA schools. If you are attending one of the top 100 FT MBA schools for your MS in Finance, we would be very happy to assess your application.

      Best wishes,
      Rishabh

  5. Ganesh Karra says:

    What about Philippines.? What is happening ?

  6. Saipavan says:

    Hi prodigy!
    I am interested in masters in US
    I have good percentage in B-Tech with an aggregate of 75%.
    Can I Get Education Loan without Assets.
    I took a back step because of financial aid, but I am interested to pursue masters.
    Now I have two years of experience in design engineering field. And I am 2014 passout and planning for 2017 intake. If you provide me education loan, my dream comes true. And I’ll repay it definitely after my masters and I have that confidence.

    • Rishabh Goel says:

      HI Ganesh,

      Thank you for your interest in Prodigy Finance.

      Yes! You can indeed get an education loan without assets! Prodigy Finance offers non-collateral loans to students at supported schools. Please see the list of schools we are currently supporting for Spring 2017 here: https://prodigyfinance.com/students_faq

      In case you have financial concerns regarding MS in US, there are multiple options to support your education. There are lots of scholarships available for aspiring students – please apply to them. Often these scholarships cover a portion of your total cost of studies and you may reach out to an education loan provider for covering the rest.

      Best wishes,
      Rishabh

  7. James says:

    Hi Rishabh, Could you please help me with your contact number as want to discuss about GMAT coaching and Prodigy loan.

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