Considering an education loan to study abroad constitutes a significant responsibility, with various factors to ponder upon. One of the most essential elements is the co-signer or a co-borrower who plays a crucial role in giving the financial commitment of cosigning an education loan. Serving as a co-signer requires more than just offering support, it involves a comprehensive understanding of the terms, risks, and responsibilities associated with the loan.
As education costs continue to rise, the role of co-signers becomes increasingly crucial, making it necessary for them to ask significant questions before agreeing to such a commitment. The first and foremost consideration should revolve around the borrower's ability to repay the loan, and the student's academic and career plans. Thus, in this article, we will delve into the types of co-signers, and a few important questions that the co-signer should ask before taking an education loan for students to study abroad. So, tighten your seatbelt as we explore more.
One key element that often leaves students scratching their heads is the difference between a primary co-signer and a financial co-signer. It's like trying to differentiate between two closely related species in the financial ecosystem. Thus, for the alacrity of the idea we have mentioned the difference below.
1. Primary Co-Signer
The term primary co-signer generally refers to the person who takes on the responsibility of the loan alongside the student. It's not solely determined by their financial profile. Students often choose their parents as primary co-signer, even if they are retired or don't have a stable income. Even if your parents are retired pensioners, they can still play a vital role as primary co-signer for your overseas education loan.
2. Financial Co-Signer
A financial co-signer, connected to the loan applicant by blood, can include first cousins, siblings, paternal or maternal uncles, and aunts. They come into play when student’s primary co-signer doesn’t have a stable income. This flexibility allows students to steer the loan process even if their immediate family members don't have a permanent income, ensuring that financial support can still be secured through blood-related co-signer.
It is important to note that not everyone from the family can be a co-signer, they should meet certain eligibility criteria set by different lenders to become a cosigner. Thus, to give you better clarity we have mentioned below the basic eligibility criteria to be met to become a co-signer.
CIBIL score should be 700 and above.
The annual income should be 6 lakh and above.
No more liabilities.
Property (collateral security) should come under city limits.
After glancing at the eligibility criteria to become a co-signer, let us move ahead and look at those important questions to be asked by the co-signers before taking an overseas education loan.
1. What are the Different Terminologies of the Loan?
An essential inquiry for a co-signer considering an education loan is to understand the loan terminologies. This encompasses the duration of the payment term, available repayment choices, the commencement date for loan repayment, and the repercussions in case there is a delay in the repayment.
Typically, the repayment tenure is up to 15 years, and it may vary among different financial lenders depending on the student's profile. It is necessary for the co-signer to be mindful before they apply for a loan with collateral or collateral free education loan for abroad, co-signers are advised to approach their queries with the mindset of borrowing money for themselves. This approach ensures a comprehensive understanding of the precise loan terms, allowing informed decision-making.
2. What Risks Come with Being a Co-Signer?
It's crucial for the co-signer to be well-versed in all the associated risks when signing an education loan. Delays in repayment by the borrower can lead to a decline in the co-signer's credit score. Additionally, if the cosigner intends to secure a loan or a mortgage, the cosigned loan can influence their credit history.
3. Is there a Provision for the Co-Signer to be Relieved of their Responsibility at any Point During the Loan Term?
Depending on the lender, a co-signer may have the option to be released from the loan through a co-signer release form. It's crucial to note that this can only occur if the primary borrower initiates the request, and the lender gives their approval. Some lenders outline specific conditions under which the borrower can qualify for a co-signer release. To minimize the associated risks of cosigning an education loan, it's essential for the co-signer to be fully aware of these release terms and conditions.
Cosigning an education loan for study abroad is indeed a big responsibility. Co-Signers, whether primary or financial, need to ask crucial questions before committing. They should understand the loan amount, repayment terms, and associated risks. With education costs rising, clear communication and awareness of the financial commitment are key.
If you want all your queries to be solved under one roof, reach out to ELAN an expert loan advisory wing, which understands the aspirations of students to study abroad. Get free online counselling for study abroad loan and an expert and personalized approach to guide students through the entire loan process, ensuring a seamless experience and end-to-end assistance.