![\"What](\"https:\/\/gmatclub.com\/blog\/wp-content\/uploads\/2017\/10\/What-are-interest-rates-and-APR-1024x512.jpg\")
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Let\u2019s face it: education is expensive. And that\u2019s before adding in an international component.<\/p>\n
Few students can afford the cost of attendance with the money that\u2019s sitting in their bank accounts \u2013 their bank, their parent\u2019s bank, and the accounts of half a dozen close friends and family members.<\/p>\n
The chances are good that you\u2019ll need an educational loan. (And, hey, if you manage to secure a full ride scholarship or you happen to stumble on the funds needed, we\u2019ll happily celebrate with you.) And even though it may not appear that way at first, there are options out there.<\/p>\n
But, you should never accept the first loan that comes your way; that\u2019s not financially responsible.<\/p>\n
It\u2019s always a good idea to compare financing offers \u2013 whether you\u2019re buying a home or pursuing a master\u2019s education abroad. To do that, you\u2019ll need to know what you should be comparing.<\/p>\n
What goes into an educational loan?<\/strong><\/p>\n At the very heart of any loan is the principal<\/strong> \u2013 or the amount you receive from the lender (or, in the case of Prodigy Finance loans<\/a>, the amount disbursed directly to the university).<\/p>\n Unless you are borrowing money from personal friends and family, you should expect to pay something for the privilege of borrowing these funds \u2013 this is known as interest<\/strong>. (And, we should note that some countries also regulate interest rates personal loans; wherever you borrow money, be sure to stay on the right side of the law to avoid stiff penalties.)<\/p>\n Loans provided by banks, private lenders, or governments usually attach an interest rate<\/strong> to the principal amount rather than a flat fee. The interest rate is the money a lender makes for providing you with the capital you need.<\/p>\n Often, interest rates are applied to the outstanding principle amount. So, if you owe $10,000 currently, your interest will be calculated using that amount multiplied by the interest rate. Next month, when you owe $9,500, your interest is calculated in the same way. And it continues to compound.<\/p>\n And, yes, it can be as complicated as it sounds.<\/p>\n Most loans also have additional fees built into the structure. In most cases, these are administrative fees<\/strong> which are applied once off at the time of loan origination (but not always as different banking systems have different norms). These aren\u2019t principal amounts, but they\u2019re also not interest amounts. All the same, they need to be accounted for in the cost of the loan.<\/p>\n There are also grace periods and repayment periods that affect the total amount you will need to repay. And that\u2019s before working in the effects of interest as it\u2019s applied to the principal amounts over time.<\/p>\n Comparing educational loans<\/strong><\/p>\n In an ideal world, you would look at a couple of different loans with the same principle in the same currency. (Though, if you\u2019re considering international study, that\u2019s probably not going to be the case.) And, if it was a simple case of principle plus interest rate, you should be able to decide which loan to take rather quickly.<\/p>\n But it\u2019s not an ideal world \u2013 and there are those fees, loan terms, and compound interest to consider. That\u2019s where APR<\/strong> comes into play. The annual percentage rate (APR) takes into account all components of a loan so that you can compare apples to apples.<\/p>\n It\u2019s critical to consider APR rather than interest rates<\/a> because many banks advertise their margins (which are interest rates on top of base rates) and going with the lowest advertised interest rate can be a false economy.<\/p>\n Confused?<\/p>\n Don\u2019t worry; it\u2019s easier to understand when you\u2019ve walked through an example of APR calculations. This video from Prodigy Finance<\/a> explains it clearly.<\/p>\n Why does it matter?<\/strong><\/p>\n As you can see from Carlo\u2019s example in the video, there can be massive differences in the total amount paid on a study loan \u2013 in many cases, it amounts to thousands of dollars (or pounds, or euros) and your future self will thank you for saving that money.<\/p>\n Post-grad education is an investment in your future<\/a>; if you consider only the principal amount disbursed or interest rates alone, you may be negating your success without realising it.<\/p>\n Of course, as an international student, you have to find available educational financing first, and that\u2019s not always easy. Your options are tied to the country you come from and the one you\u2019re going to \u2013 and your credit history won\u2019t follow you across international borders.<\/p>\n That\u2019s where Prodigy Finance comes into play. Prodigy Finance is a lending platform that provides postgraduate loans to international students from 150 countries attending the world\u2019s top universities, who would otherwise have no alternative access to finance. Loans are extended according to the company\u2019s predictive model rather than your past. Your loan amount is reflective of the amount you can earn post-MBA based on the salaries and metrics of students previously in your situation.<\/p>\n At some schools, loans may cover the full cost of tuition; at others, it\u2019s possible to borrow 80 percent of the total cost of attendance. It\u2019s a little more complex than the formulas banks use, but then, international educational financing is all Prodigy Finance does. Now, celebrating its tenth anniversary, Prodigy Finance makes it possible for students to register and see how much they\u2019ll qualify for before applying to MBA programmes<\/a>.<\/p>\n The loans are collectively funded by a community of alumni, institutional investors and qualified private investors who receive both a financial and social return. Since 2007, Prodigy Finance has provided more than US$323 million in funding to over 7,100 students with exceptionally strong repayment.<\/p>\n Take a moment to learn more about Prodigy Finance loans<\/a> and which schools are currently supported. After all, funding shouldn\u2019t be a barrier to education \u2013 nor should it keep you up at night; your GMAT prep will do that all by itself.<\/p>\n Related Resources:<\/strong><\/p>\n \u2022 The Importance of Creating a Strong MBA Budget<\/a> * This blog post is sponsored by our friends at Prodigy Finance<\/em><\/p>\n This article<\/a>\u00a0originally appeared on\u00a0<\/i>blog.accepted.com<\/a>.<\/i><\/p>\n Applying to a top b-school? The talented folks at Accepted have helped hundreds of applicants get accepted to their dream programs. Whether you are figuring out where to apply, writing your application essays, or prepping for your interviews, we are just a call (or click) away.<\/p>\n![\"Register](\"https:\/\/gmatclub.com\/blog\/wp-content\/uploads\/2017\/09\/CTA-Understanding-International-Student-Loans.png\")
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Katie studied human rights and graduated with a Bachelor\u2019s degree from Kent State University while working with NGOs in Geneva, Switzerland. Although she has since settled in South Africa, with work towards a Masters in Forced Migration through the University of the Witswatersrand, nothing stops her from being a proud American. Although writing is often solitary work, Katie has been part of the Prodigy Finance Team<\/a> as the Content Specialist since 2013. She also loves rugby, sloppy Mexican food and Tudor history which means you could find her in any section of a bookstore.<\/em><\/span><\/p>\n
\n\u2022 Having Trouble Securing a Loan for Your International MBA?<\/a>
\n\u2022 Making International Student Loans a Prime Investment<\/a>, a podcast episode<\/p>\n