Taking an overseas education loan is a preferred funding choice by most of the study abroad aspirants. While it holds many advantages, it also brings along a share of disadvantages. One such notable challenge that arises is currency exchange. Borrowing money in INR and spending it in a foreign currency, especially in emerging market economies creates a mismatch between the amount needed and the amount spent to study abroad.
While most of the leading study abroad destinations have stronger currency than INR, it becomes important for Indian students to understand the concept of currency depreciation and the impact of the falling currency.
Thus, to assist Indian students who are planning to study at foreign universities for their higher education, here’s a detailed article. Let’s discuss this primary concern and help you plan your foreign education loan in an informed manner.
Currency depreciation is an economic phenomenon that signifies a decline in the value of a country's currency concerning other currencies in the foreign exchange market. It's driven by multifaceted factors such as inflation differentials, interest rates, geopolitical developments, trade imbalances, and market speculation. This devaluation impacts the purchasing power of the currency in global transactions.
The various interwoven factors not only contribute to currency depreciation but also causes many challenges for loan applicant because of the fluctuations in currency values. As a result, students have to think twice about studying in a foreign country.
For instance, if you are taking an education loan to study in the USA and 1 United States Dollar equals to 80.10 Indian Rupee during the time of your loan sanction, but by the time your loan disbursement starts, 1 United States Dollar equals to 83.50 Indian Rupee. This fluctuation of currency would require a higher loan amount to bear with your study expenses. Hence, resulting in the need for additional loan funding.
Let’s discuss more about these challenges pertaining to falling currency ahead.
Currency depreciation increases the overall cost of studying abroad. Higher tuition fees, accommodation expenses, and daily living costs arise due to a weaker home currency against the stronger currency of the destination country.
Considering that you will be living in a foreign country for a significant period during your study tenure, there might be substantial fluctuations in the two currencies. Thus, students might need to borrow higher amounts to cover escalated expenses caused by currency depreciation. Consequently, the repayment obligation post-education will also surge. This will potentially impact your future financial plans.
Currency depreciation can adversely affect your student debt profile. Repaying loans in a stronger currency can strain your financial resources. Thus, impacting your credit scores and delaying financial milestones.
To reduce these impacts and the effects of currency depreciation on your education loan, you must have a practical approach and strong financial planning. To support you in this regard, we have jotted down some practical measures that will significantly reduce the effects of falling currency.
Since there are numerous options available in the market, choosing the right financial lender is extremely important. So do your research carefully and opt for a loan provider that offers flexibility in repayment options and favourable interest rates. This will shield you against currency fluctuations in the long run.
Stay vigilant about currency fluctuations and capitalize on temporary dips by exchanging currencies at appropriate moments. This will help you to minimise the differences in currency fluctuations.
Use personal savings or seek family support to reduce dependency on loans. This will benefit you to save money on interest rates thereby minimizing exposure to currency risks.
Another great way to manage money while staying abroad is by applying for scholarships. Umpteen scholarships are open for international students that grant a significant amount of money as scholarship awards. So, actively look out for scholarships and grants to balance your educational expenses. Furthermore, the most advantageous aspect of getting a scholarship is that you won't have to repay the money.
Consider doing part-time jobs or paid internships to supplement income and manage your expenses in your study destination. This helps you to earn and spend money in the same currency, so you won’t be experiencing any hassles of currency fluctuations. Also, it will reduce your dependency on loans.
In case you are still not able to manage your expenses abroad, then you can evaluate the possibility of taking top-up loans. This will help you manage your expenses due to currency depreciation without burdening existing loans excessively. While many financial institutions agree to provide top-up loans, you can consider loan refinancing if your bank does not offer such a facility. Loan refinancing also helps to get the lowest interest rate for education loan abroad.
Explore remote work or freelance opportunities to earn in a stronger currency. This will support you in loan repayment and managing expenses abroad. However, consider this option only if your study destination permits you to work during your study period. Don’t go against the laws as this can lead you into long-term problems.
Summing up this article, this is everything that you must know about currency depreciation. As you have already read, currency depreciation significantly influences the financial dynamics of education loans for international students. We’re hopeful that with this comprehensive understanding of its implications and by practising these financial strategies, you will be able to make the most of your study abroad experience.
Seeking guidance from experienced loan advisors at ELAN Overseas Education Loans can further provide you with invaluable insights and support in currency fluctuations. And answer all your questions regarding how to get education loan for abroad studies. Hence, ensuring a smoother educational journey abroad.
So, schedule a meeting with our Expert Loan Advisor at ELAN today to let go of the burden of financial arrangements!