Educational loan

 

Educational loan


An educational loan is that financing that is granted to a student, or to a relative or friend of a student, with the aim of covering the cost or investment involved in higher university studies (careers) or postgraduate studies (master's and doctorate).

In other words, we are talking about a personal loan, which is intended to pay for a career, a master's degree, a diploma or a doctorate. Therefore, we are talking about a type of loan, which a student requests with the aim of financing his university studies mainly.

This type of loan has different modalities, as we will see later. However, its main function, as we have said, is to cover the expenses involved in carrying out certain studies.  This, through a credit. A credit that, later, will be paid together with a previously agreed interest rate and that will depend on the characteristics of the debtor .

We must remember that a loan is a financial operation through which a person or institution (lender) grants (through a contract or agreement between the parties) an asset (normally an amount of money) to another person (borrower). This, in exchange for an interest rate (price of money).

Types of educational loan

The types of educational loan can be mainly two:

  • Short-term:  The beneficiary uses it to pay for the semester and, after paying it off during their studies, they can request another short-term credit.
  • Long-term: The financing is repaid during a period equal to or greater than the study period.

Advantages and disadvantages of the educational loan

Among the advantages of the educational loan we can highlight the following:

  • It allows students not to abandon their studies due to the lack of economic resources to finance their career.
  • It allows financing postgraduate programs that usually have a high cost.
  • The installments should be adjusted to the capacity of the debtor.
  • You can offer a grace period (no fees to pay). To cite one case, 24 months after loan disbursement. In this way, the debtor can complete, for example, his full-time postgraduate studies and re-enter the labor market. Having completed the program or degree, you can find a well-paying job and start paying off the loan.

Also, some disadvantages of the educational loan are the following:

  • Like any loan, it demands an additional disbursement for the financial expenses generated by interest.
  • The debtor must meet a series of requirements.  Requiring, in some cases, the figure of a guarantee and a clean credit history. That is, not everyone can access this type of loan.
  • The case of the United States is well known, where the high costs of studying at one of the prestigious universities such as Harvard, Stanford or Yale generate huge debts for students, who spend many years repaying the educational loan obtained to finance their studies.

Educational loan example

Suppose that the AZ bank offers educational loans for people over 20 years of age, for the financing of university or postgraduate studies locally or abroad.

The loan finances 100% of the chosen program, with a minimum amount of 4,000 dollars and a financing period of 12 to 60 months; or up to 120 months if backed by a mortgage guarantee .

Likewise, a grace period of 24 months is offered for full-time local postgraduate degrees and 30 months for undergraduate or postgraduate degrees abroad. That is, the bank makes the disbursement for the total cost of the program in period 0 and, from there, the grace period is counted.

For local full-time postgraduate courses and postgraduate courses abroad, it is required to present a solidarity guarantee, whose credit history and payment capacity will be evaluated. Also, if the loan amount is greater than $35,000, a home equity is required.

Another point to keep in mind is that the debtor can access a lower interest rate if there is an agreement between the AZ bank and the educational institution where they are going to study.


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