Educational Loan

Understand more about how to finance your MBA.

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What is an educational loan?

Educational loan is a loan offered to a student to pursue education. The loan covers expenses related to tuition fee, exam fee, living expenses like accommodation and dining charges, equipment fee (laptop), travel expenses, etc. Other expenses may also be covered depending on the scheme and the bank. Indian association of banks (IBA) has recommended the banks to do away with conditions of minimum qualifying marks in the last exam and not insisting on security for loans upto 4 lakhs. Various schemes available are listed below -

Factors to consider before you apply for a loan

  • What expenses are covered under the loan?
  • What is the maximum amount of loan available?
  • How much collateral is required?
  • What is rate of interest? Is there any concessional rate available for your institute?
  • What is the documentation required?
  • When does the repayment start? What if the student is not able to pay the installments for certain period?
  • Is there any penalty for pre-payment (i.e. paying off the loan before it is due)

Guarantor and collateral

Guarantor is a person who knows the candidate and who is ready to provide a guarantee that in case the candidate fails to repay the loan then guarantor will repay it. Banks also require collateral if the loan amount is high. Collateral security signifies the ability of the candidate to repay the loan. It can be in terms of fixed deposits, or land or cash or other forms of asset.

Repayments -

Many banks charge simple interest on the loan amount when course is in progress. Some banks allow the students to delay repayment of the loan till 6 months after the graduation. This flexibility is really helpful for those students who do not get a job on campus. The actual loan repayment starts only after 6 months. Usually the loan has to be repaid in 7-10 years. This period again varies from bank to bank. Many banks allow prepayment without any extra charges. But some banks may charge extra money for paying off the loan early.

Tie-ups with educational institutes

Some banks provide concessional rates to premier institutes like IIMs, ISB and XLRI.

Scholarships

Scholarships are an important source for raising finances for an MBA degree. There are three different types of scholarships available in the market - need based, merit-cum-means based or purely merit based. The need based scholarships are awarded based on financial background of a candidate. Merit-cum-means scholarships are based on financial condition as well as merit of the candidate.

Scholarships offered by institutes are in form tuition waivers. These scholarships most of the times take into consideration the merit of the candidate and hence they are also good indicator of academic performance of the candidate. There are many external agencies also that offer scholarships for MBA studies.

More information

To get detailed information about various financing options and scholarships offered by an institute, you should visit institute's website or interact with current students at the institute.

Advice for wanna-be entrepreneurs

Your entrepreneurial journey will invariable be marked with financial ups and downs. If you plan to take an educational loan for an MBA and start a business post-MBA make sure than your bank knows about it and is fine with non-payment of couple of installments. You should also look at those loans which allow the flexibility in repaying the loans.