Everything you need to know about your Prodigy Finance loan

Myth #1 - Prodigy Finance has hidden fees.

Incorrect. Prodigy Finance loans have no hidden fees.

You’ll be able to see exactly what’s attached to the amount of money you borrow. There is also a 2.5% admin fee.

There are no other fees attached to your loan so long as repayments on the loan are up to date or ahead of schedule.

Provided you make the minimum required payments, you’ll never see forex conversion, additional processing fees, sanction letter fees, payment charges, insurance, taxes, or any other fee on your Prodigy Finance loan. The only applicable fee is your admin fee, so long as your account is in good standing.

Instead, you pay 2.5% of the amount you borrow from Prodigy Finance, or a minimum of US $500 (GP £500 / EU €500).

The admin fee is only applied to the amount you borrow. It’s possible to reduce the size of your loan from Prodigy Finance to the minimum amount for your programme and school - even after accepting your loan, but before signing your loan agreement when arriving on campus. Doing this reduces your admin fee accordingly - and is one of the reasons why you don’t need to pay the admin fee when you initially accept your provisional loan offer. 

Myth #2 - Prodigy Finance can’t fund the full cost of your studies.

The maximum amount an international student is able to borrow from Prodigy Finance is dependent, in part, on the university and programme they pursue. In some cases, this may be up to 100% of the total Cost of Attendance (CoA equals tuition plus living expenses) provided by the university.

However, not all students are approved to borrow the full amount based on their personal financial profile and the financial earnings potential data available for the course in question.

When 100% of the CoA is not borrowed from Prodigy Finance, it's critical that borrowers demonstrate to Prodigy Finance that additional funds are available for their education. The demonstration of adequate funding is required to secure international study visas.

Demonstration of available funds is different than having this amount in your bank account; funds do not need to be liquid at this stage.

What’s critical is that you’re able to demonstrate the remaining amount needed to meet the school’s stated cost of attendance. Students wishing to study in the United States must prove they have access to the full CoA at the same time as you must submit proof to receive your I-20 form - and there is no way to apply for a US F-1 student visa without the I-20 form and you are not officially enrolled in a university until this occurs.

Students who are unable to prove to the university that they have sufficient funds to meet the stated CoA will be denied an I-20 form and will not be able to submit an international student visa application.

With these rigorous standards in mind, and because the majority of Prodigy Finance borrowers pursue their masters degrees in the United States, Prodigy Finance works with best practices to assist students and their universities to ensure the minimum financial benchmarks needed for visa processing are met. 

Myth #3 - Taking a Prodigy Finance loan is a bad idea because of interest rate parity and forex charges.

At Prodigy Finance, we believe it’s important for potential borrowers to review all of their available loan options before making a decision that’s personally and financially responsible.

For example, international students pursuing an American masters degree, should consider loans from US banks, alongside Prodigy Finance loans, alongside loans that may be available from a student’s home country.

The last part is where it becomes quite tricky as you can easily compare the APR of a loan from a US lender to the APR provided from Prodigy Finance as they’ll both be available for a US dollar loan amount. But, what are you supposed to do when the loans available in your home country are in rubles, rupees, or reals?

Tricky, right?

And, if you don’t have a finance or economics background, you might be tempted to run a search on Google for a tool to help you compare interest rates between currencies, such as interest rate parity.

However, to understand the behaviour of your currency, you can’t look at interest rate parity in isolation. There are several variables you must bear in mind:

1. Budget deficit: If the government spends more than it earns, it’ll issue additional domestic currency.
2. Trade deficit: If the economy exports more than it imports, it’ll earn more foreign currency.
3. Monetary policy: Interest rate differential could impact the currency (this is known as Interest Rate Parity).
4. Inflation: When an economy experiences inflation, domestic prices impact domestic currency.
5. Productivity: When the economy has higher productivity, enhanced production eases domestic currency.
6. Foreign Institutional Investors (FII) and Foreign Direct Investments (FDI): Institutional investors chase the best returns in global markets, while the inflow of foreign capital benefits domestic currency.
7. Central bank intervention: Central banks (and markets) prefer stable currencies and will intervene with their foreign exchange reserves to maintain stability.

Borrowers without an economics background should always be careful of using such models to make financial decisions - and may want to consult financial advisors if they’re concerned about potential forex losses.

That’s not to say, however, that international students shouldn’t be concerned about currency exchange rates.

In our example of an international student pursuing an American masters degree, Prodigy Finance mitigates at least one major forex concern by disbursing the principal loan amount directly to the school in US dollars. For students wishing to gain greater experience by remaining in the US with a valid work visa may find a loan in US dollars to be the easiest for them. 

Myth #4 - You shouldn’t take a Prodigy Finance loan because you won’t get a tax break.

Prodigy Finance is both an international loan provider and a responsible lender. That’s good news for borrowers as we adhere to the highest financial standards. And, it’s important to note that there are other factors that may impact your choice of loan offers than simply the APR or amount of loan you may qualify for.

In some countries, you may receive tax breaks on the interest paid on an educational loan. As an international loan provider you won’t qualify for these deductions.

If you or a co-borrower (which is not the same as a co-signer) has an exceptionally high income and would benefit from such tax exemption, you may indeed want to consider a local loan if you live in a country that provides for such a tax break.

On the other hand, to reap these benefits, you’ll need to repay your loan over an extended period rather than paying it off as quickly as you possibly can. It’s impossible to advise generally on the correct balance between interest and tax deductions; this is something to discuss with a private financial planner, as there are plenty of variables that will affect your situation.

Over the past decade, Prodigy Finance has found that many students are interested in:

• Remaining in the country of study after graduation to gain additional experience.

• Repaying their loan as quickly as possible. As 80% of Prodigy Finance borrowers hail from emerging economies, they also prefer to repay loans while they are still in their host country to minimise currency fluctuations.

Either one of separately, but definitely both together negate the benefits many borrowers might receive from tax breaks. It’s worth looking at your long-term intentions.