Do All International Student Loans Require Collateral?
Before you can take out a study abroad education loan, you’ll need to meet a lender’s borrowing requirements. Some lenders ask international students to put up collateral (something of value as a form of deposit) to secure the loan.
Borrowing a collateral-backed loan can be risky, though, since a lender can seize your collateral if you fall behind on payments. What’s more, you may not have sufficiently valuable collateral to borrow the loan in the first place.
Fortunately, there’s a solution to this problem: no-collateral student loans. Most lenders in the U.S. don’t require collateral for student loans. Instead, they look at other factors, such as your income, credit score and course of study when determining whether you qualify for a loan.
You can use these no-collateral student loans, also known as unsecured loans, to pay for eligible expenses when attending school.
Types of international student loans
When you explore study abroad education loans, you’ll come across two main types: secured loans, which require collateral, and unsecured loans, which don’t. Here’s a closer look at these two types of international student loans.
No collateral student loans
Some lenders, mostly those located outside of the U.S., require borrowers to back up an education loan with collateral, especially if that loan exceeds a certain amount. That collateral could take several forms, such as property, a fixed deposit, agricultural land, gold or other valuable assets.
Adding collateral to a loan reduces risk in the eyes of the lender, since the lender can claim that asset if you don’t repay your loan. However, you may not have sufficient collateral to borrow the loan amount you need for university. Even if you do, you may not want to risk your or your parents’ assets to pay for your education.
Student loans without collateral
If you prefer a no-collateral student loan, you can find unsecured loans from various lenders. In fact, most lenders in the U.S. offer unsecured student loans not requiring collateral.
You can often borrow as much as you need to cover your cost of attendance, minus any other financial aid you’ve already received. Depending on the lender, you may be able to choose between a fixed-rate student loan and one with a variable rate.
The interest rates on an unsecured loan may be higher than those on a secured loan. However, you won’t have to worry about pledging your parents’ valuables to obtain the loan. Repayment terms will vary by lender but are often between 10 and 20 years.
Eligibility requirements for a no collateral student loan
Since you’re not pledging collateral for an unsecured student loan, lenders may consider other factors when you apply, such as your credit score and income. While the exact criteria will vary by lender, here are some requirements you may need to meet:
- Minimum income. A lender may review your savings or income to ensure you have the means to pay back the loan.
- Minimum credit score. Lenders also often look at a borrower’s credit to see how they’ve managed loans in the past. As an international student, you may not have credit in the U.S. yet. Some lenders will look at alternative criteria, while others will require you to apply with a cosigner to meet this requirement.
- Cosigner. Some U.S. lenders require international students to apply with a cosigner who’s either a U.S. citizen or permanent resident. Adding this cosigner to your application can also help you meet credit and income criteria.
- Eligible school and program. Finally, lenders generally want to see that you’re attending an accredited school in a program that will lead to an eligible degree or certification.
Outside of these common requirements, lenders may look at other parts of your application, such as your grade point average in high school or college, standardized test scores and field of study.
Can you get a no collateral student loan without a cosigner?
While many U.S. lenders require you to apply with a cosigner, not all do. MPOWER Financing, for example, offers international student loans to students that don’t require collateral or a cosigner.
You can apply for a loan between US$2,001 and US$100,000 and get a fixed interest rate that will stay the same over the life of your loan. MPOWER loans have a 10-year repayment term and require interest-only payments while you’re in school and for six months after graduation. Once this period is over, you’ll start making full payments on your loan. Making on-time payments on your loan can help build your credit history in the U.S.
Along with providing loans to students at more than 400 schools in the U.S. and Canada, MPOWER Financing also provides other services, including visa support and career development guidance.
Learn more about how to apply for a no-collateral, no-cosigner loan with MPOWER Financing today.
