Higher education is becoming more and more expensive. The cost is especially spiralling up in the case of high demand courses like Engineering and MBA. Premiere institutes like IIMs have ramped up their fees. Currently IIMs can cost up to Rs. 15 lakhs for their two year post graduate program. In many cases, deserving students are not able to come up with resources and are bereft of good education. The fees have become so high that even the students who opt to work before getting their MBA are not able to afford the education. Whatever the reason may be, various banks have come to the rescue of the students. With their specially designed educational loans for MBA program, now it is becoming possible for students to pursue their dream education.
If you are willing to pursue your MBA from a premiere institute but lack the means to do so, then apply for an MBA loan. However, keep a few points in mind while applying for the course. The banks will generally ask for collateral while granting the loan. A collateral is a security and takes the form of a valuable asset. The usual collaterals are land, house or precious metal. In case of loan amount up to Rs. 400000, no collateral is required. If the loan is between Rs. 4 lakhs and Rs. 7.5 lakhs then the bank may ask for third party guarantee. However, for loans above this figure, the bank would require tangible security with value up to 100% of the loan. If you seek MBA loan from State Bank of India or the Central Bank of India, then the borrower is exempted from the requirement of furnishing the security, provided he has secured place in a premiere business school.
If the student has secured admit to Indian School of Business, then he or she may look at special SBI-ISB loan scheme. The bank will use the certificate as security for their loan. Similarly, Central Bank of India runs special scheme for IIM students where the borrower is required to take out comprehensive life insurance policy with the value equal to the loan amount and assign the policy to the bank.
Also keep in mind that the bank does not provide 100% of the expenditure as loan. It will ask for some margin money, usually 10 to 15%. This percentage denotes the amount that the borrower is required to pay from their own pocket. In some cases, the bank may grant entire 100% loan amount, but usually it asks for margin. If the loan amount is less than Rs. 4 lakhs, the margin money is nil. In case of loans above Rs. 4 lakhs, 5% margin money may be required for studies in India. In the case of foreign studies, the amount is pushed up to 15%. The Central Bank of India and Union Bank of India do not require any margin money under their special education loan scheme.
For these schemes, the bank provides repayment time period of seven years. The shorter time period is also available which is useful as the interest payable will be lower in that case. The banks also provide moratorium period. This period is the time during which the borrower is not required to make the repayment. Generally educational loans come with the moratorium period of one year after the completion of the course or six months after getting the job, whichever is earlier. However, special MBA schemes come with a shorter moratorium period. The SBI-ISB scheme allows three months after the completion of the course to start repayment. Union Bank of India offers a moratorium period ranging between 18 to 24 months or on getting the job, whichever is earlier, for its ISB loans.
There are some tips which may help the borrower lower their liability. Some banks may provide preferential interest rates for female students or for students from weaker sections of the society. Similarly, many banks offer concession if borrower starts making the repayment of the interest during the moratorium period. The interest payment on educational loan may also qualify for income tax exemption. There are several other incentives provided by the banks and each bank may have different schemes. It certainly helps if the borrower shops around for the best deal before finalizing the loan scheme.
Owing to the popularity of the course, many banks have set up ties with the business schools directly. Upon getting the admission, the students should check if their business school qualifies for any special scheme. Talking with admission counsellors at the school may help the students in zeroing in on such special schemes. Alternatively, the student may directly contact banks to know more about the current loan schemes. Now, anyone can fulfil their dream of getting an MBA with the help of this loan.
