Choosing Between USD vs INR Education Loans: Understanding APR for Informed Decisions

When exploring education loans, you might encounter various lenders, including banks, NBFCs, and international lenders like MPOWER Financing. A common dilemma arises when you find that international lenders offer loans in foreign currencies such as US Dollars (USD). Some believe that taking a loan in INR is preferable because USD loans can be more expensive, and it would be easier to repay an INR loan if you earn in USD. On the other hand, some argue that USD loans are better since they avoid FOREX charges and Tax Collected at Source (TCS). This debate is ongoing, but a crucial aspect often overlooked is the Annual Percentage Rate (APR). Let's explore whether USD vs INR education loans are more advantageous by considering the APR.

Which Lenders Give Education Loans in INR?

Several lenders offer education loans in INR. Public sector banks like SBI and UBI provide collateral-backed education loans, known for their lower interest rates. Private banks such as ICICI, Axis, and IDFC offer both collateral and non-collateral loans, with a reputation for their quicker processing times, especially for non-collateral loans. NBFCs like HDFC Credila also offer education loans in INR, distinguished by their flexible repayment options. Each type of lender caters to different needs, providing a range of choices for students seeking financial support for their education.

Which Lenders Give Education Loans in USD?

Several international lenders offer education loans in USD. MPOWER Financing is one such lender, that provides loans for studying in the USA or Canada. The approved loan amount is disbursed in USD or CAD, depending on the target university, with a maximum loan amount of USD 100,000. Interest rates start at 12.99%, and these are fixed rates that will not change over time, unlike other lenders with variable interest rates. Additionally, MPOWER Financing offers the Path2Success program, which includes visa services such as visa prep courses, financial services like opening a US bank account, and career services, including access to a customized job search tool.

What is APR in Education Loan??

The APR in an education loan represents the total annual cost of borrowing, including both the interest rate and any associated fees. It offers a comprehensive view of the loan's true cost, helping borrowers compare different loan options. Unlike the nominal interest rate, the APR reflects the actual expense of taking out a loan, making it a crucial factor in determining the most cost-effective option for financing education.

Let's understand with an example - An INR loan from a private bank using the APR perspective. Imagine taking out an unsecured loan with a co-signer from a private bank at a 12% interest rate, which is variable and may increase over time. When funds are transferred to the university and during repayment when you earn in USD, forex charges of 2% to 6% will be added. Additionally, mandatory insurance for these loans adds about 2% to 8% more. There's also a processing fee during the application process, ranging from 0.5% to 2%. Considering all these costs, the APR of an INR loan could potentially reach around 16%, though it can be lower or higher depending on the applicant's profile.

Difference Between USD and INR Education Loans

In the previous section, we conducted a thorough analysis of INR education loans from the perspective of APR. Now, let's explore the differences between USD and INR education loans and how APR plays a crucial role. For convenience, we'll assume the INR loan is an unsecured loan with a co-signer from a private bank, while the USD loan is from MPOWER Financing.

When choosing between INR and USD education loans, it's important to consider more than just the nominal interest rates. The APR gives a comprehensive view of the total borrowing cost, including all fees and additional expenses, enabling a more accurate comparison. Ultimately, your decision should be based on your specific financial situation and future earning prospects. By understanding the true cost of each loan option through the lens of APR, you can make an informed decision that best suits your needs and potentially reduce the total amount you pay over time.

If you are considering an education loan in USD, MPOWER Financing is a strong option. They offer several benefits, such as a fixed interest rate and APR starting at 12.99% (13.98% APR). Additionally, their Path2Success program provides valuable services that can simplify your education journey abroad. To apply for an MPOWER Financing education loan, you can check your eligibility with GyanDhan .