Factors to Consider When Applying for an Education Loan via MPOWER Financing

Studying abroad can be a life-changing experience, but it often comes with a hefty price tag. The cost of tuition, accommodation, and other expenses can be overwhelming, especially for students who come from modest backgrounds. This is where education loans come in handy. They provide students with the financial support they need to pursue their academic dreams overseas. However, choosing the right lender for an education loan is not a decision that should be taken lightly. It is crucial to consider various factors before signing on the dotted line. In this blog post, we will discuss the following key factors that students should consider when choosing a lender for their education loan to study abroad: 

• Eligibility criteria and documentation - they are minimum requirements that need to be fulfilled by the applicant to get the loan. 
• Cosigner requirements - the requirements like minimum income, credit history, or more that your co-applicant must fulfill.
• Loan amount - the maximum limit of the loan amount that the lender can provide you in both cases i.e. secured and unsecured education loans.
• Disbursement - it refers to the act of paying out or distributing funds (as per applicant need), particularly in the context of education loans that you have taken.
• Rate of interest and APR - Interest rate refers to the percentage of the loan amount that a borrower pays to the lender as a fee for borrowing the money. The APR can be also referred to as the annualized cost of your loan.
• Interest rate discounts - it refers to a reduction in the interest rate charged on a loan, typically offered as an incentive to borrowers who meet certain criteria 
• Additional considerations - as the name suggests these are some additional charges or limitations that you will need to consider in order to get the education loan like margin money, foreign exchange (Forex) charges, insurance charges, and more.
• Moratorium period and repayment options - generally referred to as the course duration plus the grace period after it. You need to see whether you have to make any repayments during the moratorium period or not.

Check Your Education Loan Eligibility

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Eligibility criteria and documentation

When choosing a lender it is important to know their eligibility and documentation process. There are many lenders that have developed their own list of universities/colleges from which they check your eligibility to take an education loan. You may also need to consider the processing time for the whole loan process so that you can plan things accordingly. Another thing that you need to consider is the medium of the process, whether it is offline, online, or a mix of both.

MPOWER Financing offers a completely online loan application process, with quick eligibility checking and form filling taking only 30 minutes. Their document requirements are brief, and a document checklist is provided to speed-up uploading on the dashboard (approx time 30 minutes or less), with an instant conditional offer received once all documents are reviewed. This allows borrowers to start their visa process promptly.

Cosigner requirements

If you are going for a non-collateral (unsecured) education loan then it would be necessary for the majority of lenders that you have a cosigner with a minimum criteria of income and credit history. You would need to consider this as a core requirement because each lender may require different minimum incomes or credit scores for a cosigner. There are some lenders like MPOWER Financing which offer no-collateral and no-cosigner loans. They make loan decisions based on your future potential, rather than your family background, income, or assets because they believe everyone deserves the opportunity to succeed. Thus, there are no cosigner requirements that you have to worry about when taking a loan with MPOWER. 

Education loan amount and disbursement process

Now, the whole point of choosing a good lender is that you are able to get all your requirements fulfilled and one of the core requirements in the case of an abroad education loan is the loan amount. There are lenders that can give you loans in INR and then there are lenders that can even give you loans in USD. The loan amount can be as low as 10 Lakhs INR and can go up to 1 to 2 Crore INR in the case of Indian lenders. The maximum loan amount depends greatly on whether you are willing to pledge collateral or not; in case the decision is a no, the max loan amount can be up to 50 Lakhs INR. In the case of international lenders, the loan amount can be up to US$150,000 or more depending on creditworthiness. The disbursement process also plays a vital role in making a decision for an appropriate lending option. The disbursement process can take place by the lender sending money directly to the university/college saving you forex and other charges, or by sending the money to your account.

MPOWER Financing offers loans of up to US$50,000 per academic period, with a maximum limit of US$100,000, also allowing borrowers to supplement their MPOWER loan with additional loans from other lenders. Borrowers can also take out multiple small loans throughout the academic duration to prevent unnecessary interest expenses by taking a loan of excessive money at the start. The loan disbursement is made directly to the school via wire transfer or physical check, depending on the school's preference.

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Loan tenure

Loan tenure or repayment tenure refers to the duration of time for which a borrower is required to repay their loan. It is an important factor while making a decision for choosing the lender for you as a shorter loan tenure can help you in saving interest and ultimately a lot of money, but this will lead to higher monthly installments. In case you cannot bear high monthly installments then you can opt for lenders that have a longer loan tenure. 

MPOWER Financing's loan tenure is up to 10 years, considered optimum (considering a good balance between expected future salary and loan obligation) to avoid increased interest payment. For example, borrowing US$100,000 at 12.74% (13.98% APR)for 10 years would result in a total interest payment of US$99,629, while borrowing for 15 years would result in a US$146,978 interest payment. Prepayment without penalty is available, enabling borrowers to save on interest by closing their loans early.

Favorable interest rate and APR on your loan

The majority of lenders in the study abroad industry have a floating interest rate but few have fixed interest rates. Having a fixed interest rate means that no matter what the market conditions are or how much the global rate increases, your interest rate will be fixed right from the start. This will help you to ensure that you are aware of the payment structure for your entire loan and you will be able to budget your net income accordingly. Better budgeting means fewer chances of delayed payment and thus a better credit score.

APR (Annual Percentage Rate) is meant to serve as an overview of the interest and fees associated with a loan. An APR is therefore often higher than an interest rate. In simple words, APR is calculated upon the amount of the loan plus the additional charges that are related to this loan amount like administration costs and more. The APR can be also referred to as the annualized cost of your loan. The interest rate and APR for MPOWER Financing range from 12.99% (13.98% APR) to 15.99% (17.08% APR). However, you can be eligible for a discount by enrolling for autopay.

Interest rate discounts

These are offered by lenders to borrowers as a means to reduce the overall cost of borrowing. These discounts are usually offered when borrowers meet certain criteria, such as maintaining a good academic record or setting up automatic monthly payments. This is an important factor to consider as this helps to reduce the overall cost to borrow which can be a great relief for you. 

MPOWER Financing offers reasonable interest rates that ranges from 12.99% (13.98% APR) to 15.99% (17.08% APR). By signing up for autopay, borrowers can avail an interest rate discount of 0.25%, bringing the interest rate down thus the new range will start from 12.74% (13.72% APR). Autopay allows for automatic debiting of loan payments, ensuring timely payments.

INR Loans vs USD Loans by MPOWER

Many students may perceive the risk-based pricing of MPOWER, at 13.72% APR, as high. A number of students might receive higher APRs due to factors such as low credit scores, program choices, or university selection, etc. This contributes to the development of a perception that INR loans are more favorable. However, to accurately compare INR loans with USD loans from MPOWER, one must consider the following factors:

• The initial rates for unsecured loans with cosigners, offered by competitors and appearing to be low at greater than 11.5-12%, may have experienced an increase during the graduation period over the last few years.
• An additional 2% to 6% is added for forex charges, covering expenses incurred during fund transfers to the university and at the time of repayment.
• 4. A range of 1% to 8% is factored in for various insurance charges.
• 5. An accounting of 0.5% to 2% is made for processing fees.

Considering all these things you will get that the APR of unsecured loans in INR with co-signer could exceed 16%.

Calculate your Education Loan EMI

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Additional considerations: MPOWER vs other lenders

There are many additional costs associated with taking an education loan. In MPOWER Financing you do not have to pay anything out of your pocket up until the first interest-only payment that you will make during the moratorium period. The different additional costs which can be associated with your abroad education loan in the case of other lenders but not with MPOWER are as follows - 

• Margin money - when you apply for an education loan then there are a few lenders like public banks and more that provide you with a percentage of amount like 80%. The remaining 20% amount you have to arrange yourself and you also have to show the proof to the bank. This remaining amount that you are arranging by yourself is called margin money. But in the case of MPOWER, the margin money is nil (0) which means that MPOWER can finance 100% of the loan amount up to US$100,000. 

• No insurance required - there is fixed insurance that you would have to take in order to get an abroad education loan, which is an additional cost. Other lenders can charge you 1.5% to 10% of the loan amount for insurance on your education loan. On the contrary, there are no insurance requirements or charges in MPOWER loans.

• Disbursement Forex charges - Banks and other lenders may charge you an additional amount in the name of a Forex charge (1% - 3% + GST) when they transfer the loan amount to your university but MPOWER being a lender that sanctions loans in USD does not charge any disbursement Forex charges.

• Origination fees - in almost all the other lending options you have to pay an upfront fee so that your loan can be disbursed but this is not the case with MPOWER Financing. There is a 5% origination fee which is incurred but the same is added to the loan amount (no upfront payment). This 5% origination fee is levied on the disbursed amount only.  

• Building U.S. credit history - as the loan amount is credited in foreign currency therefore you have great chances to build your U.S. credit history by making timely payments which can help you with future loans. In the future, if you decide to work in the USA or Canada and you need either a personal loan, car loan or home loan, having a good U.S. credit history is going to help you there greatly. In fact, you may be able to get reasonable rates on renting an apartment because of your good U.S. credit history.

Path2Success program

This is a career service established by MPOWER that helps borrowers understand the success parameters in their chosen path, and what additional things they can do to prepare. This is an additional service that could cost extra with other lenders but is absolutely free with MPOWER Financing. The main aim of this program is to overcome the unique challenges that students can face in the U.S. job market. Path2Success offers customized career support that caters to individual needs, and currently helps MPOWER clients with:

• One-on-one sessions with a recruiting expert to review your job search plan
• Review of your resume, Linkedin profile, and cover letter by industry experts 
• Access to a video interview simulator to practice video interviews and receive a personalized report on soft skills, personality traits, communication, and overall interview performance 

Interest-only repayments

Payments will be interest-only until course completion, plus an additional 6-month grace period. In simple words, you only have to pay interest during the course and 6-month grace period, and after that, your EMI will start. This is a great benefit as it reduces the monetary burden on you and helps you to focus on your studies and future career.

Now that you have understood all the factors that you need to consider while deciding on the lender for an abroad education loan, we hope this will help you to make an informed decision. Similarly, you can also consider MPOWER Financing to take a loan to study in the USA and Canada as it has significant benefits like fixed interest rates, interest-only repayments, good loan tenure, reasonable interest rates with discounts, and most importantly, no requirement for a cosigner or collateral. So what are you waiting for, check your loan eligibility now! 

Disclaimer: This blog has been developed in paid partnership with MPOWER Financing