Most of us as international students take education loans in our home country to pursue higher education in US because studying Masters in USA Costs a lot of money and not everyone can afford it, we take education loans from banks. Let me share with you my story and how I paid off my education loan and explain why it is the best.
My Education loan details :
I took $25,000 of education loan in India for my US education from one of the national banks. As usual, as you know, they asked for all the property papers or any assets to back up the loan. Ultimately, we ended up getting loan and the interest rate we got was 14% Interest rate per annum. It is called APR (Annual percentage rate in USA).
Interest rates in US vs India or your country
As I wrote in article Where to put your money either in US or India?, the interest rates in US are very low. It is on either side, either for borrowing money or your money sitting in bank account. In US, you can get a personal loan for around 9% APR or even less. Sometimes, there are balance transfers on your cards where you can draw cash for less APR. The key point here is, it is cheaper to borrow money from a US Bank than from your home country like India. In this context, if you just look at the difference between US Personal loan vs Indian education loan interest rates, there is a solid difference of 14 – 9 = 5% APR.
How did I pay loan? Best way to pay education loan in your Home country?
Over the course of my student life in US, I have build good Credit History. After I graduated and got job, I went back to one of my banks that I had account for a long time and asked them if I could get a personal loan. I have looked up some banks and they give personal loans without any security for up to $25,000. Obviously, as you know, they will run your credit check and determine your credit history. Also, they asked to submit my pay stubs of the last two months. After I submitted everything, they gave me a personal loan of $25,000 without any security backing like car or anything. I took all the money and sent back to India. I got the US loan for 8.9%, my Indian education loan was 14%. I did a solid saving of 5.1% per annum. Just to run you the numbers,
- it is a saving of $1,275 per annum for $25,000 loan. If you have not realized, you have saved 1/20th of your loan amount on interest rate per year.
- If you take 5 years to pay off the loan, then you may save more than $5,000 just on interest rate.
Anyways, the rationale for taking loan in US is just simple, low interest rates. There are other options too, you may take a 0% balance transfer on credit cards too if you cannot get a loan. The only thing is you may have 4% transaction fee and stuff, but if you plan to pay it late or you have a good deal, I think it is worth taking it.
How to get Education Loan in USA as as International Student ? No Credit History ?
One of the promising Y-Combinator funded fintech startups founded by international students, who went through the same journey, has an option for international students/ working professionals to get personal/education loan. You can get loan for financing your refinancing your education loan, close our your credit cards, pay for your relocation, spouse education, etc. You can get loan anywhere from $1,000 USD to $35,000 USD depending on your eligibility, even without credit history. You also build credit history, if you get loan approved. We have partnered with them, you can Apply for Personal Loan / Education Loan at Stilt
Can you think of any other creative way to pay off your education loan in Home country after Graduation and getting job in US ?