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Need additional money to finance your studies abroad? Top-up loans may help you

Priyadarshini Maji
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Last year’s 13.2 per cent depreciation of the rupee against the dollar year-to-date has affected a lot of people, especially those who have expenses in foreign currency. For instance, people whose children are already studying overseas or who plan to send their children for studies abroad. Most people take an education loan to fund their expenses for foreign studies, but with the depreciation of the rupee, the expenses will increase — generally, in times as such parents/students apply for an additional education loan to fund expenses.

In case you need more money to fund your study abroad, experts suggest one should opt for a top-up loan from their existing bank, from where they have already taken an educational loan. However, sanctioning of the additional loan amount depends on their maximum loan eligibility and the current outstanding amount. For instance, suppose you were eligible for a loan of Rs 30 lakh but you had taken a loan of only Rs 20 lakh. Of this, you have already paid Rs 12 lakh and the outstanding loan amount is Rs 8 lakh. In this case, your net eligibility will be Rs 22 lakh. For secured loans, the amount of education loan is linked to the value of the collateral, and to the cost of education. Education loans normally cover expenses such as living expenses, books, project expenses, traveling, computer, and the full tuition fee, as determined by the university.

You can also look at other banks and NBFCs, in case your current bank refuses to meet your additional funding requirement. According to experts, if another bank agrees to lend, then you can either opt for a transfer of your existing loan from your old bank to the new bank or you can take a fresh loan altogether. Education-specific NBFCs like HDFC’s Credila and Avanse also provide additional education loans. They are in form of top-up loans or refinancing of student loans.

The sanctioning of a top-up loan depends on the bank or the financial company s policies. Top-up loans, however, come with a higher interest rate than existing loans. The interest rates are either fixed or floating and vary between 12 to 15 per cent on top-up loans. It also depends on various factors like the loan amount availed, loan tenure, student s academic record, experience, market conditions, and the educational institute.

Some of these loans also require additional collateral, apart from the higher interest rate which depends on the applicant and the co-borrowers merit and credit-worthiness. Industry experts add, the applicant’s Loan To Value (LTV) ratio will increase if he provides additional collateral, which will also help him get a competitive rate of interest.