When it comes to international students looking for education financing, one of the biggest concerns is the impact on their families.
Usually, students do not have sufficient collateral to provide for their loans. This means their parents or relatives must give them security for their loans.
Getting a student loan can significantly benefit international students planning to study overseas.
Without it, millions of students would not have been able to pursue their desired educational institutions.
The article covers how to get an educational loan abroad without collateral.
SEE ALSO: How to Get Rid of Private Student Loan Debt Legally
What Is Student Loan Collateral?
Traditional lenders are very conservative when it comes to loans. They typically require collateral to limit their financial risk. These types of loans are known as secured loans.
When it comes to loans, collateral is a promise made to support the loan. For instance, if the borrower fails to make the payments on their home loan, the lender can take possession of the house to recover its losses.
On the other hand, the lender can use the car as collateral for car loans.
Unlike a car or home loan, student loans do not have an underlying asset. Therefore, collateral can be of various types. For instance, it can be a home or a piece of land.
However, if the student fails to make the payments on time, the lender can seize the property as payment.
How to Get Educational Loan Abroad Without Collateral
International students can take out various types of loans without securing collateral.
One is the uncollateralized student loan, commonly called a signature loan. It requires a US citizen or permanent resident as a cosigner.
Private lenders such as Citizens One, Wells Fargo, and Discover allow students with a good credit history to take out a signature loan.
If you have a relative who is a US citizen or permanent resident and they are willing to be responsible for the payments, this type of loan might be appropriate.
However, remember that this relative is at risk, and you should not rely on them to make the payments.
If you fail to make the payments on time, the lender may take the loan into default. This can result in various actions, such as increasing the costs of borrowing for the cosigner, suing the cosigner, and garnishing their wages.
Another prominent US-based student loan provider for international students is MPower Financing.
This company, an affiliate of Edupass, provides fixed-rate loans to students from various countries studying at over 350 universities in the US and Canada.
Unlike other student loan providers, MPOWER Financing doesn’t require a cosigner, collateral, or credit score.
However, it does need students within two years of graduating to be eligible for its loans.
Prodigy Finance is a good option for international students planning to study in Europe.
This company has more restrictions on the degree program, country of origin, and university it services.
However, compared to MPower Financing, this may be a better choice for students pursuing an MBA or STEM program in Europe.
SEE ALSO: 5 Best Graduate Student Loans
Disadvantages of Collateralized Loans
One of the biggest disadvantages of collateralized loans is that it is not an option for many international students. They simply do not have the necessary assets to qualify for a loan.
There are some disadvantages even for international students who do have this option.
One of these is finding a friend or relative willing to provide their assets as collateral for your loan.
Many students are reluctant to take on this type of financial risk due to the potential impact it could have on their friends and family.
Another disadvantage of collateralized loans is that they prevent the assets from being pledged for other types of loans.
For instance, if your family’s business is taking out a loan, the business’s credit may no longer be the same as before.
If you have the necessary assets to secure a loan, consider using a collateralized loan.
These types of loans lower the interest rate compared to loans without collateral. Since the risk is lower, the rates tend to be reduced.
SEE ALSO: 5 Easy Ways to Secure a Private Student Loan
Conclusion
There are several ways to secure educational loans abroad without collateral, as the article revealed.
These loans come with several stringent measures and can be very overwhelming.
We hope you find the article helpful.