How to get education loan for MBA and other courses?


Cost of higher education such as MBA may not be affordable for everyone. In such situation people tend to think about the Education Loans.


Just to bring clarity on this topic I am posting the detailed procedure for availing an education loan.

Pre-requisites for education loans: Documents Required
· You need to have a valid admission letter from an institution. This means you should have already been selected in the institution.
· Also get the complete expense details of the course you are pursuing. Before approaching bank find out the total cost of education including tuition fee, hostel fee, books cost etc.
· Mark sheet of last qualifying exam.
· Two of your photographs.
· You should also have sufficient money to pay a part of the total education cost. (around 20% of total education you need to bear, rest all would be paid by bank)


Note: The documents for availing the education loan may vary from bank to bank and the list of the required document can be seen in the education loan application form,


Eligibility to get education loan
All graduation, post-graduation and professional courses are eligible for an education loan. Also the courses that offer a degree or diploma can avail education loans.
These courses could be from foreign universities or institutes approved by the state and central government.



Various Education expenses covered under education loan.
Education loan doesn’t cover only the Tuition fee but various other expenses too which are incurred in the course of your education. Some of such expenses are:
· Tuition Fee
· Hostel Fee
· Cost of books needed during the course
· Cost of computer/laptop if it is mandatory for the course.
· Cost of flying, if the course is in abroad.etc

In general
Education Loan Amount=Tuition Fee+ Hostel fee + Books Cost+ Equipment cost+ Flight Charges + etc


Security for your loan
This depends on your Loan amount, if your loan amount is less than Rs.4,00,000/- you don’t need to provide a security.
If the loan amount is more then you need to provide security for availing the education loan.
Security means surrendering some form of assets or investment to the bank for availing the loan. Some form of investments and assets that are accepted as security deposit by banks are:
· Government securities,
· Shares ,
· Bank deposits,
· National Saving Certificates
· House property
· Land Property
· Shop etc
In case you are not able to pay back the education loan, the bank will have rights to sell these assets so as to recover the loan amount from you.


Guarantor for your loan
In cases when loan amount is not too big , but still higher than 4,00,000/- then the bank may ask for a third party to act as a guarantor for your loan instead of asking for security deposit.
In case you are not able to pay the loan, the guarantor of your loan will be legally bound to pay the loan.


Repayment of Loan
Until you are pursuing the course for which you have availed the education loan you don’t need to worry about its repayment. The repayment of your loan may start at :
· -some banks ask for repayment to start after 6 months of completion of course
· -while some other banks ask for repayment to start after a year of completion of course
· -there is also option to start the repayment once you have secured a job. (but this doesn't mean that you can delay repayment of loan infinitely, after a certain period of time you are obliged to start the repayment of your loan irrespective of the fact whether you have secured a job or not)


Repayment Installments
In most of the cases 10 years would be maximum tenure in which you need to pay back the loan after completion of the course.
Perhaps the number of years for repayment of loan also depends on the amount of loan.
If your loan amount is say around Rs.4,00,000/- then probably you may get 5-7 years only for repayment of the loan.
If the loan amount is larger then you may get 10 years for repayment of the loan.



Frequently Asked Questions - FAQs

What are the current rate of interest?
For most of the banks like PNB/SBI rate of interest for education loan varies between: 12.75 to 14.5% depending on various education loan schemes and also on the bank.

Is there any rebate for girl candidate?
Education Loan from most of the banks are cheaper for girls, for female candidates education loan is given at special interest rate which is slightly lower.
Currently SBI/PNB are giving 0.50% concession in interest for girl students

I need an education loan of 3.5 Lacs but do not have anything to show as Security. What should I do?
For loans upto 4 lacs security is no required you just need to furnish co-obligation of parents (as per SBI/PNB). Below is the detailed break up of various limits:
Upto 4 lacs:
- Co-obligation of parents
- No security
Above Rs. 4 lacs and upto Rs.7.50 lacs
-Co-obligation of parents together with collateral security in the form of suitable third party guarantee.
-The sanctioning authority can replace Third Part Guarantee with Parent/ Guardian as co-borrower provided the Gross Annual income of Parent/ Guardian (co-borrower) as verified by the latest Income Tax Return is 3 times the loan amount.
Above Rs.7.50 lacs
-Co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of instalments. The security can be in the form of land/ building/ Govt.Securities/ Public Sector Bonds/ Units of UTI, NSC, KVP, LIC policy, gold, shares/ debentures, bank deposit in the name of student/ parent/ guardian or any other third party.
-The documents should be executed by both the student and the parent/guardian as joint-borrower. We clarify that if the student is a minor, the documents will be signed by the guardian acting `for self’ as well as `for and on behalf of the minor’.

Can my in-laws be my co-obligatrs foor education loans?
The co-obligator should be parent(s)/guardian of the student borrower. In case of married person, co-obligator can be spouse or the parent(s)/parents-in-law.

What should be shown as security for education loan?
It may be in the form of Property or fixed deposits. The value of the security whatever form it is, should be of substantial when compared with the the Loan amount.
This will again also vary from bank to bank.

Complete list of Documents required for education loan?
Completed Education Loan Application Form.
Mark sheets of last qualifying examination
Proof of admission scholarship, studentship etc
Schedule of expenses for the specified course
2 passport size photographs
PAN Card of the student and the Parent/ Guardian
Borrower's Bank account statement for the last six months
Income tax Returns/ IT assessment order, of last 2 yrs (If IT Payee)
Brief statement of assets and liabilities, of the Co-borrower
Proof of Income (i.e. Salary slips/ Form 16 etc. if applicable)

What is the maximum amount that can be availed under educational loans? / How is the maximum loan amount calculated? 
The maximum loan amount varies from bank to bank, but, most importantly, it depends on the course for which the loan is sought and the institution chosen. For example, the loan amount for an M.B.A. course would be different for different institutes--the fees at I.I.M.'s would be approximately Rs 2 Lac, whereas at Somaiya it would be Rs 80,000. Hence the loan amount will vary drastically. But many banks have a margin criterion, which means that they would provide up to 75 per cent or 90 per cent of the total cost of the course, while the balance has to be paid by the applicant. The loan amount can also depend on the borrower's parents/guardians net monthly salary. The loan amount could also be calculated as being six or 10 times the monthly salary of the parent. Ultimately, however, the loan amount would depend on the discretion of the bank. 

Is there any penalty in case of prepayment of loan?
No prepayment penalty is levied for prepayment of loan.

When does the repayment of loan commence?
Repayment will commence after Course period + 1 year OR 6 months after getting job, whichever is earlier.

In whose name the loan would be granted?
Loan would be granted in Student’s name


What is the maximum amount I can avail?
For studies in India: Rs. 10 lacs
If the amount exceeds Rs. 7.5 lacs, then security shall be required
For Abroad: 20 lacs

What are the eligibility criteria for Education Loan?
-Should be an Indian National
-Should have secured admission to a higher education course in recognized institutions  in India or Abroad through Entrance Test/ Merit Based Selection process after completion of HSC(10 plus 2 or equivalent). OR Where the admission is purely based on marks scored in qualifying examinations, there is a cut off percentage of marks of 50% for SC/ST and 60% for General category.

Would my entire fee be funded by the bank?
Upto Rs 4 lacs- Entire fee shall be funded by the bank
Above 4 lacs certain margin(5-10%) shall be required to be brought in by the student/guardian

What is the moratorium period ? 
Moratorium Period is a holiday on repayment which would be for the course period + 1 year or 6 months after the student gets a job/start earning whichever is earlier. Some banks will also allow you a moratorium on payment of interest. This means that you can defer payments of even the interest...

What is the minimum age for getting Education Loan? 
There is no specific restriction with regard to the age of the student to be eligible for education loan.

What are the courses covered for Education loan? 
Education loanis available for all Approved courses leading to Graduate/ Post Graduate degree and PG Diplomas conducted by recognized colleges/ universities recognized by UGC/ Govt. / AICTE/ AIBMS/ ICMR etc.
Loan is also available for part time courses and job oriented courses subject to employability and earning potential.
Education loans for study abroad is also available for job oriented professional/technical courses offered by reputed universities.

What are the expenses considered for Education Loan? 
A. Finance is provided to meet all type of expenses which are necessary for completion of course and also include purchase of books, equipments, computer, travelling, study tours, boarding, lodging besides all types of fees.

How much loan amount one is eligible under Education loan? 
Studies in India    -   Max. Rs.10 lac
Studies abroad    -    Max. Rs.20 lac

Are there any processing charges one has to pay for availing Education loan? 
For studies in India, there is NIL processing fee, however, documentation charges of Rs.270/- for loans up to Rs. 4 lac and Rs.450/- above Rs.4.00 lac - exclusive of service tax and education cess are charged.
For Studies abroad: Upfront fee @ 1% with a minimum of Rs.10,000/- which is refundable on availment of the loan.

Whether, Student can get second loan after completion of first course for other course? 
Second loan (Top up loans) to students for pursuing further studies can be considered at the level of Circle Head, on merits, within the overall eligibility limit taking into account genuineness, accessibility, future repaying capacity of the student borrower, recovery of loan and subject to taking required security provided further studies are commenced during the moratorium period of the first loan.

Whether reimbursement of fees is permitted in Education Loan scheme? 
Yes, reimbursement of fees paid by the student/ guardian at the time of admission or subsequent stages is permissible within six months from the date of payment of fees on individual merits of the case.

What if Student do not have PAN, can one get an education loan without having a PAN card?
If PAN is not available at the time of sanction, the same can be submitted within one year of disbursement of loan

Whether Loan account can be transferred from one branch/ place to other branch/ place? 
Yes, to facilitate hassle free deposit of repayment dues, and to have proper monitoring.

Is Insurance cover for education loans students mandatory? Also is there any compulsion of getting cover from a particular company?

No, it is optional and is on voluntary basis. Student can get himself/ herself insured from the company of choice and assign the policy in the Bank’s name. However, Banks have made arrangement with insurance providers to provide the insurance at competitive rate and easy terms and conditions.

If you have any other queries related with education loan post it below...

56 comments:

  1. good post!i have a doubt .. say m applying for a loan of about 20 lakhs .. so i need to show a security right .. n apart from that should i show some amount in my bank account too?like FD or somethin like that?is that required!thanks!

    ReplyDelete
  2. Hi Hema,

    Yeah you need to show securtiy....
    It may be in the form of Property or fixed deposits...
    The value of the security whatever form it is, should be of substantial when compared with the the Loan amount.
    This will again also vary from bank to bank.
    Let me know if u have any other query.....

    Thanks

    ReplyDelete
  3. Is there any rebate for girl candidate?

    ReplyDelete
  4. Hi Hema,

    Education Loan from most of the banks are cheaper for girls education loan at special interest rate.

    Keep Writing!

    One Request:
    Please share this page with your friends on Facebook!

    Cheers!

    ReplyDelete
  5. sir, if the loan amount is 12 lakh rupees. then what should be the value of the security ?

    ReplyDelete
  6. Hi Anonymous,

    Below are details from SBI on the same:
    Upto Rs. 4 lacs: No Security
    Above Rs. 4 lacs to Rs. 7.50 lacs: Collateral security in the form of suitable third party guarantee. The bank may, at its discretion, in exceptional cases, weive third party guarantee if satisfied with the net-worth/means of parent/s who would be executing the documents as "joint borrower"
    Above Rs. 7.50 lacs.: Tangible collateral security of suitable value, along with the assignment of future income of the student for payment of installments.

    In simple words the Security Amount requested varies based on your financial condition and also via anticipating your future income. Say if you are doing MBA from ISB your income would be easily 15L+ per year. This will also be considered as sort of security by bank. The exact details you can get from bank itself by directly calling them.

    Feel free to ask any more questions....
    One Request:
    Require your support, please share this page with your friends !

    Cheers!

    ReplyDelete
  7. Hai Sir,

    Is there any way of securing a scholarship in d reputed institutions, esp in IIMs. If there r options for a scholarship, cn u pls elucidate d procedures or, in case, the requisite exams for the sake of obtaining a one. Are there any other institutions which help the students with scholarships? If so, What are they?

    I came to know dis blog thru a frnd f mine. Ur doing an exceedingly wonderful job. My admirations n thanks :) Keep posting!!

    ReplyDelete
  8. Sir,
    Further. I am a student of Chartered Accountancy. I went through all the selection criteria for the IIMs posted by u, where I learnt that to clear through the admission process, one must earn a percenatage f 80+ in their degree. Actually, CA is being recognised as a post graduate course by d IIMs n other top 10 institutions. My only concern is, we students can expect only an average percentage of 60+ in our course, which is usually regarded as a good achievement, for we hv quite a tough scoring pattern posed by ICAI. Will the same is being recognised by the top 10 institutions?(esp IIMs n FMS. am targeting them.)

    I hv dne with my PCC (inter) with two attempts bt hv 60+ score. I wl try my rarest best to clear my finals in my 1st attempt. I am about to give CAT in 2013.

    Apart frm CA, am also doing CS n BA(economics)in distance education mode from MU. Wl this make my profile attractive? I dont hv any work experiance. Bt. I hv dne 3 n half years internship frm a good audit firm. Does the IIMs n FMS recognise dis as a work experiance?!! Guide me.

    sumirti.ca@gmail.com

    ReplyDelete
  9. Hi Sumirti,

    Thanks for all your a[appreciation...we really need support from the readers of the blog!

    About the scholarship
    There are scholarships available at each of the IIMs for outstanding students.
    Also IIms provide financial help to needy students by giving fee waiver, I am in process of writing a detailed post for the same. Please stay tuned. But be assured that definitely there is scholarship at IIMs.

    About Selection criteria
    Even if you take example of IIM-A, 70% weightage is given to CAT scores and other 30% is based on Application Rating (10th, 12th,Bachelor's degree, master's degree & work exp.)
    So if you do well in CAT you don't need to bother much. I believe they don''t count internship as work exp., would still try to get more info on that for you.
    As per IIM-A selection criteria for students who have done CA I found foll:
    "For those candidates having cleared CA/ICWAI without having Bachelor’s Degree,
    their average of inter and final levels marks will be treated as Bachelor’s degree
    marks"

    I believe multiple degrees such as CS n BA(economics) will not give you much advantage in terms of AR score, but surely in terms of knowledge you are gaining out of these degrees.
    The knowledge should surely help you in your interviews. Also you need to justify it well in interviews, the reasons for doing multiple courses at the same time? Somehow you need to convince interviewers that both of these courses were enabling you to get in depth knowledge in finance. It should not look like you were not sure what to do and without much planning you have opted for these courses under influence of someone else. It should be something like this that you had a keen interest in finance and zeal to learn & explore more about the same. So you opted for both.

    Keep writing...and keep sharing your thoughts!

    One Request:
    We require your support in making this site popular and make it reach to more students, please do share this page with your friends!

    All the best!

    Cheers!!!

    => Share with your Facebook friends

    => Like us on Facebook

    ReplyDelete
  10. Hellow sir ,

    its kinda wierd to ask bt i cant resist doing so
    what if a person takes a loan of about 8 lakh Rs and fails to deposit so after his course or is no more , what would the procedure be after that by the bank to recover the amount !!

    ReplyDelete
  11. Dear Sebin,

    Would require some more time to answer that :)

    Stat tuned....keep writing!

    Cheers

    ReplyDelete
  12. Hello Sir,

    Thanks a lot for the detailed reply :)I feel much encouraged and completely hopeful.

    N ofcourse. It might sometime appear messy as I do more than one course. Bt. its not out of anyone's compulsion. I love economics and business a lot. I wanted to be a Strategic Analyst/Consultant or a Social Entrepreneur. The only reason why I yearn for a MBA s becoz am completely bored wid d regulations, rules n tax provisions. These have vry little to do wid business although they are a part of it.

    Wl follow u up for further more guidance.
    Thanks a lot for d patience n care ur bestowing on us.

    Wl let my frndz knw. For sure:)

    Sumirti Singaravel

    sumirti.ca@gmail.com

    ReplyDelete
  13. This comment has been removed by the author.

    ReplyDelete
  14. *sry. I want to be...

    I have already liked ur page in FB n am a part of ur group CAT 2013 in FB.:)

    ReplyDelete
  15. Hi,

    I have been preparing for MBA and I am sure that I will study only in grade A business schools like IIMs, ISB, SP JAIN etc., If I get admit there, is there a necessity to show any collateral for applying loans .. ? Coz I missed my MS in USA only bcoz of this thing.. Not able to produce a collateral (land property) to get a loan. And ofcourse I cannot persuade any of my relatives to give their property for security. So kindly help me out before I take the leap into this.

    ReplyDelete
    Replies
    1. Dear Vigneshwar,

      I would shortly update you with your query, apologies for delay.

      Good Luck!

      Delete
    2. Dear Vigneshwar,

      If you are doing MBA from any of the grade A business schools, then for loan upto 10 Lakhs you do not need to show any security. Only co-obligation of Parent / Guardian is required.
      Also for ISB where fees is pretty high, An additional privilege extended to the ISB students is that the loans are available without any collateral and no processing charges will be collected.

      One request:
      We desperately require your support to keep this free blog running, please do support us by sharing this site with all your friends, online MBA groups,


      Keep Writing!!!

      All the best!

      Cheers!!!


      => Add us to your Facebook friend list

      => Like us on Facebook & Join for CAT related updates

      => Join Facebook Group for CAT 2013 Aspirants

      Delete
  16. is there no any facilites of loan in college campus??
    i heared that in every iim college campus having a bank which has giving loan easily to a desire student as norm of bank that student have to take life insurence as equal to loan???????

    ReplyDelete
    Replies
    1. Dear Sonu,

      In recent pasts Banks have started this trend. But I don't think that should be a major concern if you are doing an MBA from top colleges.

      Feel free to ask any further question!!!

      All the best!
      Cheers!

      Delete
  17. Hi,
    I have already taken a bank loan for B.Tech. Can I get another loan for MBA if i got admission in A class institutions????
    plz suggest..!!!

    ReplyDelete
    Replies
    1. Dear Anonymous,

      It depends on loan amount and the security you have shown to bank. You should not try to get 2 loans on same security, based on 2 different securities you should be able to get loans. Also getting loans becomes much easier if you join a top college.


      One request:
      We desperately require your support to keep this free blog running, please do support us by sharing this site with all your friends, online MBA groups,


      Keep Writing!!!

      All the best!

      Cheers!!!


      => Add us to your Facebook friend list

      => Like us on Facebook & Join for CAT related updates

      Delete
  18. I am Chris, i want to study MBA pls mail me the details of Education Loan Requirements and which bank is give loan for less interest pls ....

    ReplyDelete
  19. Hi..

    Which banks offer education loans for IIM/XLRI students without collateral or co borrower. I have eard about Central Bank of India. Is there any other bank also?

    ReplyDelete
  20. Dear Anonymous,

    If you get through IIM/XLRI the colleges, getting loans without collateral from any of the top bank such SBI, BOI would not be difficult. You would surely have advantage of IIM/XLRI tag. Loan should be the last time you should be bothered about when entering IIMs/XLRI.

    All the best!

    ReplyDelete
  21. Nice post for me. Actually i was searching for education loan and i found your post, its helping me a lot.Thanks


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  22. very nice . thanks it is very useful . www.gyandaata.com/notes

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  23. Hi,
    My question is irrelevant to the post but just out of curiosity i wanted to ask you if i've scored 91.1 percentile with a composite score of 683.5 in MAT what colleges can i opt for (as all your posts were concerning CAT scores)and if the college fee is over 6 lacs as u mentioned earlier 20% would be my responsibility and then bank will pay the other 80% right.

    ReplyDelete
  24. I want to ask if one doesnt have any guardian,and he is the only earning member of his family,then can he take education loan for studying MBA from bank?

    ReplyDelete
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