by The thought of studying abroad in your dream institution is alone exciting; what comes after you start planning for it is crucial. Irrespective of financial limitations, an education loan makes it possible for students from divergent backgrounds to study in another country.
However, when browsing for suitable educational loan providers, one may quickly become mired in the vocabulary, which is where being familiar with basic loan terminologies pays off. Below are some common loan definitions that can come in handy when you go through the hassle of applying for a foreign education loan from any financial institution.
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Crucial Terms for Your Education Loan Application
Find below the simplified language surrounding education loans that will empower you with the knowledge needed to navigate your application process confidently.
- Co-Signer/ Co-Applicant
A co-applicant or a co-signer is the additional person responsible for the underwriting of the loan along with the principal applicant. If the applicant does not complete their studies or fails to repay the loan, the co-applicant will be responsible for paying it back to the bank. - Collateral Loan
Collateral is an asset or a form of physical wealth that the applicant can pledge to a lender to secure their loan. Common collateral types include houses, plot, shop, non-agricultural land, investments, etc. In case you fail to make payments, the bank can seize the collateral as a replacement for that loan. - Non-Collateral Loan
Non collateral education loans for abroad studies are where the borrowers are not required to secure their loans with assets or physical wealth. The approval depends on the applicant and co-applicant’s income or credit history. - Quantum of Finance
Quantum of finance refers to the maximum funding the lender is willing to provide for a particular course or program. The represented amount is used to cover various expenses such as tuition fees, accommodation, and related costs. The quantum of finance depends on the course being pursued or the institution chosen. - Principal Amount
The amount of money you borrowed from a lender is the principal amount. When you start repaying your loan, this amount decreases. However, the principal amount does not include the interest you owe to your financial institution. - Moratorium Period
In the moratorium phase, borrowers are granted a break from making loan repayments to their lender. The typical time covered in this period includes the course duration along with an additional span of 6 months to 1 year (depending on your financial institution.) Additionally, some financial institutions require the borrower to pay a simple interest in the moratorium period immediately after the loan is sanctioned. - Grace Period
The Grace Period is an additional duration in which the borrower is not required to make any loan payments. A grace period is typically requested from the borrower’s end, and its approval entirely depends on the terms of the bank they took a loan. - Loan Tenure
The loan tenure refers to the period during which the borrower is expected to repay their education loan, which often begins once the moratorium period ends. The length may vary depending on the loan amount, interest rate, and borrower capacity. - Loan Margin
In education loans, the loan margin or the margin money is the portion of the total educational expenses that the borrower is required to fund from their sources. These requirements might differ among financial institutions and are typically a small percentage of the total loan-sanctioned amount.
The above definitions might have helped you with a basic understanding of loan terminologies. However, there are many more to add to the list, which could be overly complex to comprehend.
Many top overseas education loan advisors offer free online counselling for study abroad loans by breaking down the complex definitions of loans in simple language to help you understand them efficiently!
