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MBA Education Loan: Get ready now to get the best deals on loan for MBA course

Candidates who are in search of resources, find it difficult to bring in lakhs of Rupees to fulfill their desire of pursuing MBA.

education loanTop rated MBA colleges like MDI, NITIE, SPJIMR have finalized their merit lists for MBA admission 2014 and have published the same with the instructions to deposit the fee by a stipulated date. While NITIE has asked the candidates to depos

it Rs. 4.19 lakhs by May 5, 2014, MDI has also asked for Rs.75 thousand to be deposited in May followed by more deposit in the month of June 2014. Students who are in search of resources, find it difficult to bring in lakhs of Rupees to fulfill their desire of pursuing MBA.

Doing MBA is an expensive affair

No doubt pursuing MBA from one of the top rated B school is your dream and you have prepared hard to get shortlisted for final admission round and then for getting your name in the merit list.

But has it ever occurred to you that your MBA programme does come with an expensive price tag. Whether it’s the MBA from IIMs, MDI, SPJIMR, IMT, IMI, BIMTECH or even from the next tier institutes, a big hole in your pocket is imminent.

Don’t think that Government sponsored and supported IIMs are less expensive.  Their fee structure is as high as that of Private institutes and at times it can be even higher.

Only a few top B schools like FMS Delhi, MMS programmes at JBIMS, NL Dalmia and other B schools in Maharashtra have low fee structure as they are university affiliated programmes.

Average fee structure

IIMs have a fee range between Rs.9 to Rs.17 lakhs, private B schools have a fee structure beginning from Rs.6 lakhs to Rs.16 lakhs and funding of it is a big issue. You may also go for MBA admission in foreign campuses of some of the B schools at a price tag between Rs. 18 to Rs.25 lakhs if you have the resources. Explore the available options to fund the MBA

Option-1: Scholarship

Most of the B schools offer scholarships to high percentilers and to the candidates with outstanding academic record. A part of your expenses can be funded with such scholarship amount. But neither it is offered to all nor it is a very good amount. Hence, it may prove to be a drop in the ocean. If the course fee is about Rs.10 lakhs, scholarship will be somewhere around Rs. 2 to 3 lakhs. You will still need a major chunk for the remaining fee and other expenses

For example, SPJIMR, Mumbai gives 100% tuition fee waiver in the form of scholarship to a selected few;  BIMTECH Greater Noida and FORE New Delhi offer 38 and 42 scholarships respectively to 80 to 100 percentilers with a fee waiver of  23% to 50%; MDI awards 5 scholarships of Rs. 10 thousand each to the toppers. These scholarships, if awarded can definitely reduce the financial burden to some extent but still more funds to pursue the MBA will be required.

Option-2: Your family, relatives and friends

If you are from a very rich family, you can definitely foot the MBA expenses bill. But if you belong to a middle class family or your self- respect comes in between, there is a problem then.

You may ask for financial assistance from your friends and relatives and promise to repay the same later. It can be an option the sanctity of which is always doubtful. It can be resolved by]

– Make a written agreement to repay at some later date in the manner suitable to both of you

– Try to insert some interest component to be paid alongwith the principal amount, it will  make your relative happier and softer

– It will relieve you of following irritating incidents

Sometimes it so happens that your relatives may begin enquiring about your personal habits like living style, dressing style, dining out, enjoying the life out as you have borrowed from them and they are not sure whether you are utilizing the money judiciously. Writing an agreement may restore your peace of mind.

Option-3: Your savings from Salary  

MBA is pursued both by freshers and working professionals. While freshers do not have any source of income, working professional with 3-4 years of work experience might have saved something. So this option may be available to those who are working and are getting hefty pay packet. If you have saved that much, it’s possible that high fee bill can be borne by you.

But then number of other factors calls for consideration. For example if you have any dependants, you will need to look after them. If you are married and your spouse is not working, you need some money for that. Then you may not think of full time MBA which you always wanted to pursue.

Option-4: Banks and Financial institutions

This in fact is the best option with the assistance of which you will complete your MBA without imposing a burden on your family or on your savings although a nominal part of the fee and other expenses might have to be borne by you.

Different funding schemes: Premier and Non premier B schools

Banks have two types of education funding schemes. Some of the banks have categorized premium B schools which include IIMs, XLRI, SPJIMR, JBIMS, MDI, IMT, IMI and other top rated institutions for example there is “SBI scholar loan scheme” which caters to the financial need of the students who get admission in these top rated MBA institutes. Similarly Central Bank of India, Dena Bank, Punjab National Bank and many more have attractive funding schemes especially designed for the students of these B schools.

Banks have their parameters to decide such premier B schools and their branches are provided with the lists of these top rated institutes.

Major USPs of Premium MBA study loan scheme-

Low rate of interest in the range of 10.7 to 11.9% per annum in comparison to regular education loan schemes. SBI is charging 10.7%; Central Bank 10.75%; Dena Bank 11.8%

– Maximum loan amount can go upto Rs.20 lakhs without any guarantee or collateral security. Higher amount can also be taken by offering the required guarantee and/or security. Central Bank of India provides Rs. 20 lakhs; SBI Rs.15 Lakhs; Dena Bank Rs.10 lakhs

– Loan upto 100% of course fee can be availed. SBI and Dena bank need a margin of 5% and offer 95% amount; Central Bank of India does not ask for any margin and offers 100% as loan

– Simple interest will be charged during course duration

– Additional Interest benefit, if parent becomes co borrower

– Repayment begins after one year from the completion of the course and to be made in 7 years

Second type comprises all other MBA/PGDM institutes which are not covered in the premier B school list. Banks provide less financial assistance to pursue education in these institutes and charge higher rate of interest. Besides margin is also required even for slightly higher than minimum prescribed amount say more than Rs.4 lakhs or Rs.7 lakhs which varies from Bank to Bank.

Required Documents

Following documents can be asked by the Bank before processing the study loan for MBA education in a premier B school

1. Admission letter of the Institute.
2. Letter from institute indicating full fee structure of the course.
3. Passport size photograph of the student (2-3) and parent (If he/she is the co borrower)
4. Copy of PAN CARD of the student and parent (If he/she is the co borrower)
5. Copy of Passport/Driving License/ Voter ID/ Electricity bill (to determine the address proof).
6. Copy of Class 10th, 12th, and Graduation mark sheet and certificate.
7. Original copy of the receipts of any fee paid to the institute, so far, pertaining to course fee.

How much can be funded

Banks can finance either the entire tuition fee or other expenses like hostel charges, study material, laptop without any contribution from you or may ask you to contribute a little in the range of 5 to 10 percent, if higher amount is borrowed. This contribution is called the margin money and banks ask for it to involve the borrower’s funds to some extent.

Understand with the example

Suppose total of fee, hostel, laptop, study material expenses for the MBA education come to Rs. 10 lakhs. If you approach the bank and the bank is satisfied with your need and agrees to finance your MBA education in full, you will not contribute anything towards the margin money. But, if bank says that you have to contribute 5% of the total project cost i.e. the fee and other expenses required to pursue MBA education, you will have to deposit Rs.50 thousand with the Bank as margin money and the rest Rs.9.5 lakhs will be financed to you by the Bank.

Rate of interest is moderate

Funding from banks for MBA education in top b schools is not so expensive looking at the trend as the interest range of  10.75 to 12 percent per annum is charged, depending upon the loan scheme of the Bank. It comes to less than 1% per month

It is probably State Bank of India which is providing the cheapest loan at 10.70% and it is the Central Bank of India which is offering maximum loan amount of Rs. 20 lakhs without any margin, to pursue MBA from top rated B schools. Apart from these banks loan facilities are available from almost all the banks including Punjab National Bank, Punjab & Sind Bank, Axis Bank, ICICI bank.

Repayment of Loan

Most of the banks have framed the maximum period for repayment of Loan taken to pursue education. The loan with interest should be repaid in a period of 5 to 7 years. This period will begin after 6 months of the completion of the course or from the date of getting employed, whichever is earlier.

When to approach

Should you approach the Bank immediately on knowing that your name figures in the merit list or wait a little? Following are the key tips to follow before proceeding with your study loan plans

-Wait for the admission offer

-study and understand the key features of loan schemes of different banks. Now a day it has become easier as the information is available on banks’ site

– Find out the fee structure and the best suitable bank for you that can finance maximum at the cheapest rate and with lowest margin

– Watch out for any hidden charges, processing fee on loan. Although Banks have waived processing charges on Study loan for premier B schools, you have to verify the fact before entering the agreement.

– You must be having a bank account, approach that bank and try to get maximum information. This is no longer a bank dominated world, you have all the right to know the details before availing the loan.

– Every good B school has a Bank branch. Usually these banks get the list of new admissions from the institute with all the details and send in principle loan sanction letter to the eligible candidates.  You should contact the loan sanctioning branch of the bank and thereafter as per the guidance from this branch, should approach the concerned branch of this bank.

Most of the time completion of the loan formalities and disbursement are done by the branch which is nearer to your permanent residence.

 Immediate Benefits

The funding from Bank will help you pursue MBA without any financial hurdle.

You may not avail entire loan at one go, better to borrow the amount as and when the institute demands it. It will further reduce the interest burden.

The amount that you had may be utilized fruitfully at your home or for further income generation.

You have ample repayment period after completion of the course, hence do not have to worry much about the repayment.

In most of the Banks simple interest is charged during course period. If you wish, you can repay the interest part to reduce loan burden in future.

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