Read these 10 tips before you apply for your MBA loan

Read these 10 tips before you apply for your MBA loan​

For study in India, the maximum loan you can take is Rs. 10 lakh. For studying abroad, the Quantum of loan is Rs. 20 lakh.

The MBA aspirants who have got final admission call from a leading B-School are now on cloud nine with excitement, but a look at the fee structure might dampen the spirit to some extent. But there is nothing to worry as the banks are always there at your rescue in such situations. They are ready to offer you education loan, which will not only take care of your tuition fee but the other expenses which you will be having during the duration of your course.

But to apply for an education loan, you can’t just wake up one fine morning and get the formalities done. It’s a time consuming process to apply for the loan till your loan is sanctioned. Before you apply for education loan, you need to keep in mind certain factors.

MBAUniverse.com brings to you the 10 important factors that you need to know before applying for education loan.

1. Quantum of Loan: Quantum of Loan refers to the amount of loan you can get from a bank. For study in India, the maximum loan you can take is Rs. 10 lakh. For studying abroad, the Quantum of loan is Rs. 20 lakh.

2. Collateral & Margin: For loan up to Rs. 4 lakh, you do not need to provide collateral or a guarantor. Co-obligation of parents or guardians is required. For loan amount above Rs. 4 lakh, for studying in India the margin is five per cent. For studies abroad, the margin is 15 per cent of the loan amount.

3. Expenses covered: The basic expenses covered by the education loan are:

• Fees payable to college/school/hostel

• Examination/Library/Laboratory fees

• Purchase of Books/Equipment/Instruments/Uniforms

• Caution Deposit/Building Fund/Refundable Deposit (maximum 10 per cent tuition fees for the entire course)

• Travel expenses/Passage money for studies abroad

• Purchase of computers considered necessary for completion of course

Some of the leading banks also provide the cost of a two wheeler as part of the loan. For e.g. State Bank of India covers the cost of a Two-wheeler up to Rs. 50, 000.

4. Repayment Tenure: The maximum tenure to repay the loan is seven years. The moratorium period is course period + 1 year or six months after getting job, whichever is earlier.

5. Eligibility conditions: To be eligible for an education loan, the borrower should be an Indian within the age group of 16 to 26 years. The applicants’ parents or guardian should have a regular source of income so that they are able to repay the loan if the need arises. The applicant should have secured admission in any of the graduate or post-graduate courses offered by an institute which is recognized by UGC or AICTE.

6. Subsidy for Economically Weaker Section: Government subsidy on education loan is in force with effect from the financial year 2009-2010. Interest subsidy offered by central government on education loans for students from Economically Weaker Sections (EWS) with annual gross parental or family income up to Rs. 4.50 lakh per annum for studies in India. Full interest subsidy will be provided to such students during the moratorium period of the educational loans. The subsidy is applicable for loan taken after April 1, 2009. The certification for the parental income will have to be done by a competent authority at the local level. Most states still have to notify such authority so this scheme is still awaiting proper activation.

7. Discount for women applicants: Some banks offer 0.5 to one per cent discount on interest rates for women.

8. Discount on top B-schools: Some banks offer 0.5 to one per cent discount on loans taken for the top B-schools like IIMs, MDI Gurgaon, XLRI Jamshedpur etc.

9. Interest Rates among Private Banks & PSU banks: The interest rates of the public sector banks are much higher than the private sector banks. Let us compare some more interest rates among the leading nationalized and privatized banks:

Nationalized banks

Interest Rates

Up to Rs. 4 lakh

Rs. 4 lakh to Rs. 10 lakh

State Bank of India

12.00

12.50, 13.50

Punjab National Bank

12.00

12.75

Union Bank

13.25

13.00, 13.75

Central Bank of India

11.50

11.50

Corporation Bank

11.65

12.15, 12.65

Bank of India

13.00

13.00, 13.50

Bank of Baroda

11.50

13.50

Indian Overseas Bank

11.50

12.50, 12.75

Private Banks

Interest Rates

Up to Rs. 4 lakh

Rs. 4 lakh to Rs. 10 lakh

Axis Bank

15.75

14.75, 16.75

IDBI Bank

12.75

13.00

Credila

10.95

10.95

10. EMI to be paid: In order to find out how much you will have to pay monthly to the banks once you are ready to repay you will have to do proper home work. You should find out in advance the amount of Equated Monthly Installments you will have to pay every month. To know the amount which has to be paid every month, you can visit the website of the bank from which you are planning to take the loan. You can make use of the online EMI Calculator. The fields which you have to fill in the calculator are Amount, Duration and Interest Rate. You will get the EMI and the total interest to be paid. The amount to be repaid can be anywhere between Rs. 10,000 to Rs. 30, 000. So you have to be sure enough that you get the right job which will be able to bear your EMIs to be paid.

 

[Swaswati Borpuzari]

10 Essential Tips Before You Apply for Your MBA Loan​

Pursuing an MBA can be a transformative step in your career, but the financial burden of tuition fees, living expenses, and other costs can be daunting. Many students opt for MBA loans to bridge the funding gap, ensuring they can focus on their studies without the added stress of financial constraints. However, applying for an MBA loan is a significant decision that requires careful consideration. Here are 10 essential tips to help you navigate the process:

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Before applying for an MBA loan, create a detailed budget that includes tuition, fees, books, living expenses, and any other expenses related to your program. This will help you determine the exact amount you need to borrow. Overestimating can lead to unnecessary debt, while underestimating can leave you short of funds during your studies.

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MBA loans should be your last resort after exhausting other financial aid options. Research scholarships, grants, and fellowships that are available from your university, private organizations, and professional associations. These can significantly reduce the amount you need to borrow.

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Your credit score plays a crucial role in determining the interest rate and terms of your MBA loan. Before applying, check your credit score and take steps to improve it if necessary. A higher credit score can lead to more favorable loan terms, potentially saving you thousands of dollars in interest.

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Not all MBA loans are created equal. Compare different lenders, including federal and private loan providers, to find the best rates and terms. Look at factors such as interest rates, repayment options, and any additional fees. Some lenders may also offer specialized MBA loans with unique benefits.

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Read the fine print of the loan agreement carefully. Pay attention to the interest rate, repayment period, grace period, and any penalties for late payments. Understanding these terms will help you avoid surprises and make informed decisions about your financial future.

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If you have a limited credit history or a low credit score, consider getting a co-signer for your MBA loan. A co-signer, typically a parent or guardian, can help you secure a loan with more favorable terms. However, ensure that both you and the co-signer are fully aware of the responsibilities and potential risks involved.

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Different MBA loans offer various repayment options. Some lenders allow you to defer payments until after graduation, while others require you to start paying interest immediately. Consider your financial situation and the repayment options that best fit your needs. Some lenders also offer income-driven repayment plans, which can be particularly helpful if you expect to have a variable income post-graduation.

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Consider your future earning potential and how it will impact your ability to repay the loan. Research the average starting salaries for MBA graduates in your desired field and location. This will help you determine if the loan amount you are considering is manageable in the long run.

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Consulting with a financial advisor can provide valuable insights and guidance. They can help you understand the implications of different loan options and suggest strategies for managing your debt effectively. This is especially important if you are considering a significant loan amount or if you have multiple sources of financial aid.

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Some MBA programs and employers offer loan forgiveness programs for graduates who work in certain sectors or roles. Research these programs and determine if they could help reduce your loan burden. For example, some nonprofits and government agencies offer loan forgiveness to MBA graduates who work for them for a certain period.

Conclusion​

Applying for an MBA loan is a significant financial decision that can have long-lasting implications. By carefully assessing your needs, exploring all financial aid options, and understanding the terms and conditions of different loans, you can make the best choice for your financial future. Remember, the goal is to invest in your education without compromising your financial stability. Follow these tips to ensure that you are well-prepared and well-informed as you embark on this important journey.