Study Abroad Loan without Collateral: Prodigy Finance vs MPOWER Financing vs Leap Finance
This is the time when a majority of study abroad aspirants would have received the offers for the fall intake. As always, the study-abroad financing part still remains a major concern for international students. Scholarships and financial aid are extremely competitive and might not cover the whole expenditure. Education loans are quite handy in such cases. But, the traditional banks would demand full collateral security. In this article, we will look at how to avail of a study abroad loan without collateral to study abroad. Additionally, we will look at the major new-age financial services companies that offer the best loans without collateral for study abroad.
Study Abroad Loan without Collateral and Co-Signer
Traditional banks ask for co-signer (or guaranteer) and full collateral. Additionally, you may also find you can’t secure the full cost of attendance through a bank loan even with a prohibitively high-interest rate. So, what to do? Here comes the new-age fintech players like Prodigy Finance, MPOWER Financing, and Leap Finance.
Unlike traditional banks, these new-age fintech players (non-banking financial institutions) provide education loans without collateral and co-signer on the basis of your earning potential after the completion of the program.
Prodigy Finace was started as a small community in 2007, to finance the accepted students at INSEAD. Funds were crowdsourced from alumni, financial institutions and socially-aware investors to support students who often experience difficulties securing sufficient educational loans in their home or host countries.
Prodigy Finance lends loans to students from 118 countries for studying abroad across the world. However, the university has to be a partner one. At present, they support over 750 universities in 18 different countries for Business, Engineering, Law, Public Policy, and Medical programs at the Masters level. and are expanding all the time.
There will be an 8.9% annual simple fixed margin plus a variable base rate (3-month USD LIBOR of 0.2% as of 1st January 2021) 10% Prodigy Finance APR includes the effects of all financing costs (including the impact of admin fee of 5% of the total loan amount). Repayment starts after 6 months of finishing the course.
MPOWER Financing is a Public Benefit Corporation and was started in 2014. MPOWER Financing lends to students who are within 2 years from graduation and uses a proprietary credit model that considers borrowers’ academic success and career path.
The company lends to 190+ nationalities, including Americans. MPOWER Financing’s services are available at 350 university and college programs in the US and Canada.
MPOWER Financing offers 10-year, fixed-rate loans ranging from $2,000 to $50,000 and charges an administrative fee of 5%, which is added to the total loan amount. Interest rates range between 7.99% and 13.99% and can go down as low as 6.49% after interest rate discounts.
Students need to pay the interest while attending the university. This reduces the student’s total interest burden (because the interest does not capitalize) and helps them to build a credit score while they are in school. Additionally, there is a grace period of 6 months after graduation.
The funds can be used for tuition fees, housing, meals, health insurance, and other expenses certified by the university. MPOWER reports student payments to the U.S. Credit Bureau, which helps international students build a U.S. credit history.
Leap Finance was launched in 2019, with a goal to provide affordable student loans with lower interest rates. Currently, it provides education loans to Indian students for STEM studies at the Masters level in the US.
Indian candidates can avail themselves of the loans to attend 2200+ programs at 209 schools at 93 universities across the US. The 13 eligible states are Texas, Arizona, New York, North Carolina, Ohio, Florida, Georgia, Illinois, Massachusetts, Utah, Virginia, New Jersey, and Wisconsin.
Leap Finance funds up-to 100% of your cost of attendance, which typically includes tuition and fees, books and supplies, room and board, transportation and personal expenses.
A co-signer is not required. However, a cosigner’s credential may result in better loan terms like lower interest rates. Leap Finance does not evaluate the co-signer in their ability to service the loan as the loan is sanctioned based on the student’s merit (including GRE scores, overall academic performance history, and even work experience) and future earning potential.
Leap Finance charges a processing fee of 2%. The interest rates vary between 7.99% and 9.99%.
Students need to pay the interest while studying. During the 6-month grace period, a token amount (say, INR 5,000 per month) needs to be paid as well.
What is the advantage of Taking Study Abroad Loans from Prodigy, MPOWER, or Leap?
It’s true that there are certain disadvantages. Here are the key ones:
- Loans can be availed only for partner schools and designated programs
- Limited study abroad destinations
- You have to attend a top or Tier-1 university abroad in order to be eligible
- High-interest rates
By student loan standards, they’re high, but they’re better than the alternative, which might be a loan from a home country that could involve putting up collateral, such as a house.
Yes, the key advantage is that you do not require collateral or a co-signer. It’s actually a great attempt to diminish the economic barrier. You will be granted a loan solely on the basis of your academic merit and potential.
Secondly, you can avail the loan in the foreign currency (in USD). This is something I can related personally very much.
During my Masters studies in the UK, when I had borrowed the loan amount, it was 1 GBP ~ INR 78 – 80. Later, when I had started repaying back, in the first two years, it was 1 GBP ~ INR 66/67. I had to pay ~ INR 1.5 – 2 Lacs more due to currency value fluctuations.
I had taken my education loan from SBI. Back in those days, interest rates were in the range of 11 – 14% for abroad education loans. So, if you are aspiring to attend a top-tier school and looking for a study abroad loan with collateral, these are actually good options.
So, which is the best among Prodigy Finance, MPOWER Financing, and Leap Finance?
Well, like choosing universities, there is nothing called best. All you need to do know is choosing what’s right for you. Here is a quick summary on Prodigy Finance vs MPOWER Financing vs Leap Finance.
Prodigy Finance vs MPOWER Financing vs Leap Finance
|Prodigy Finance||MPOWER Financing||Leap Finance|
|Eligible Countries||18 Countries including the popular study abroad destinations||US and Canada||USA|
|Eligible Programs||Check Here||Check Here||Check Here|
|Eligible Level||MS/MBA||MS, MBA and UG (Final 1 - 2 Years)||MS|
|Minimum Loan Amount (USD)||$15,000||$2,000||$10,000 - $40,000|
|Interest Rate (Appx.) and Type||9% - 10.5% [Variable-Rate Loan]||7.99% - 13.99% (it could be as low as 6.49%) [Fixed-Rate Loan]||7.99% - 9.99% [Fixed-Rate Loan]|
|Admin Fee||5% of the loan amount||5% of the loan amolunt||2% of the loan amount|
|Maximum Loan Amount||80% - 100% of all expenses||USD $50,000||Full expenses|
|Pros||Simple interest; offers loans for Non-STEM Programs and outside US/Canada too.||Interest rate discounts and UG students are eligible as well||Fixed-rate loans at comparatively low-interest rates|
|Cons||No fixed-rate option; and only PG programs (MS/MBA)||Low-loan maximums and high-interest rates||Loans for only MS STEM programs in the US|
As you can see that you have to get an offer from one of the top universities in order to get a study abroad loan without collateral. So, if you need help with study abroad queries – profile building, application strategy, etc., please feel free to book an online counselling session (30/60 minutes) with our experts. You can also avail of our admission counselling services for UG, MS, and MBA.
Author: Tanmoy Ray
I am a Career Adviser & MS Admission Consultant. Additionally, I also manage online marketing at Stoodnt. I did my Masters from the UK (Aston University) and have worked at the University of Oxford (UK), Utrecht University (Netherlands), University of New South Wales (Australia) and MeetUniversity (India).
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