Today’s economic environment poses challenges for Indians abroad, especially students. But amid the challenges of a weak rupee and high inflation, here are some financial tips students can follow when they are studying abroad as explained by Ashwini Kumar, Vice President and General Manager (India), MPOWER Financing :
Ashwini Kumar
First, establish a credit score as soon as possible. New migrants usually have to build a credit profile from scratch, as your Indian credit history can generally not be used abroad. As a student, however, you can use your in-school years to establish a credit profile, thus positioning yourself favorably for life after graduation. Both students and professionals alike can establish a credit score by building a relationship with a bank and getting a credit card as soon as possible. A person without a credit history will most likely only be eligible for a secured credit card, which requires a refundable security deposit and has a credit limit based on the amount deposited. The security deposit reduces the risk for the lender, which makes it easier to get approved. This is one of the most common steps to getting into foreign credit systems. Your university likely has bank branches nearby that are accustomed to working with Indian nationals.
Second, amid today’s rising interest rate environment, you should only consider fixed-rate loans. In recent months the Reserve Bank of India (RBI) has already raised interest rates substantially and is expected to continue doing so over the next several months or years. This means that Indian students who have entered into variable-rate loans may see their payments rising substantially. On the other hand, fixed-rate loans have interest rates that are fixed (pre-determined) for the entire tenure of the loan. They have a constant EMI (monthly installment), so you can be confident that your payments will never increase over time. As a result, fixed-rate loans facilitate predictable payments and enable stronger financial planning.
Third, Indians going to the United States should only avail U.S. dollar loans. Within the past year, the rupee has fallen considerably – which means that students who have been relying on rupee-denominated loans or savings may now have a financial shortfall when it comes time to pay their tuition bills. All of this can be avoided by seeking U.S. dollar funding and asking your university for guidance. Foreign universities often present students with a long list of scholarships and trusted loan options – usually through web portals like IEFA.org, internationalstudentloan.com, elmselect.com, or their university website.
Fourth, graduates of American universities can refinance foreign loans. Refinancing is the practice of paying off an old loan with a new loan that provides a better interest rate, lower payments, and/or other more desirable terms. Refinancing a foreign loan through a provider can help you further establish a U.S. credit history and unlock access to the wider American financial ecosystem.
Fifth and finally, always remember that loans are only one option to finance your overseas education. Students should always pursue scholarships as a primary funding solution. Scholarship portals such as internationalscholarships.com and eduPASS.org may provide targeted scholarship offerings for students based on your profiles and characteristics. Furthermore, many students pursue part-time or co-op employment in addition to loans to fund their studies. A combination of all sources of funding can help you ensure that you are making the best financial decision.
Strong credit history is very important and can help you save many thousands of dollars throughout your life. Good credit leads to financial inclusion: qualifying for better rates on loans, setting up utilities, renting an apartment or a car, and getting certain jobs. With the above toolkit, Indian students abroad can set themselves up for financial success.
This column is part of a bouquet of tips being published all of August - a special offering by The Free Press Journal to help Indian students going abroad to study.
