'I got admission in MBA at a good b school. The Bank has agreed to provide education loan to fund the MBA course but the interest rate is 12%. Is there any way to negotiate or reduce this burden?’ It is a common but most prominent question, answer to which is being sought by prospective MBA aspirants approaching the banks to avail education loans. Team MBAUniverse.com made a research on funding your MBA and has come out with number of options available from banks to the MBA aspirants.
In fact gathering the fund sources has now got a bit easier with number of banks and financial institutions offering education loans. There was a time when banks in India used to be rigid on their schemes, policies, terms and conditions. The scene has changed now and you may negotiate with the Banks to bring the terms in your favour.
MBAUniverse.com presents answers to round of queries raised by MBA aspirants, after analyzing the various MBA education loan schemes offered by different banks with the objectives ‘how to negotiate with banks’ and ‘how to reduce the gigantic amount of interest on this loan.’
Q. What should I do in the first place to get education loan at low interest rate?
Ans. You should find the bank offering higher amount at low interest. If you compare among SBI, Central Bank of India, Canara Bank, Union Bank of India you will find they have competitive rates. UBI and Canara bank have lower interest rates than SBI and Central bank of India.
Q. My bank is charging more than 12% interest. Is there any bank charging less?
Ans. Yes, number of Nationalized as well as private sector banks and other financial institutions offer education loans at lower rate of interest. Following few are the examples-
PNB-11.25%; Central bank of India – 10.75%; SBI-10.70%; Union Bank of India-10.25%; Canara Bank-10.20%
Q. How much amount can I expect from the bank to fund my MBA education?
Ans. Banks extend financial assistance for almost all the expenses related to your MBA education including tuition fee, hostel and mess charges, other fee like sports, library, education tour. Different banks have their limitation cap in a range of Rs.10 lakhs to Rs.20 lakhs depending upon your requirement.
Q. Do the banks with lower interest structure fund less for MBA education?
Ans. No, on the contrary a few of them have their branches in the B school campus and have special tailor made schemes commensurate to the fund requirements to cover the MBA education expenses at the particular B school at even lower rates. For example State Bank of India at IIM Ahmedabad campus offers education loan upto Rs.20 lakhs at 10.20% intt and at MDI campus it offers education loan upto Rs. 15 lakhs at 10.70% to pursue MBA. Central Bank offers it at MDI at 10.75%. Choice is yours
Q. The interest amount will still be pretty high. Can I reduce it further?
Ans. Sure, Payment of interest during course period can bring some relief. Most of the banks do not charge compound interest on MBA education loan during the course period and upto 6 months after completion of the course or till you are employed whichever is earlier. It saves a good amount on interest.
Q. What is the maximum interest that can be negotiated and how am I supposed to negotiate when banks have their own finalized policies for funding the MBA education?
Ans. 1 to 2% Interest amount can be negotiated with the Banks within their finalized framework. Interest is the price paid to avail the education loan. This price as per the new policy of RBI may vary from bank to bank and has empowered the borrower to negotiate with the lender bank. Following are the areas where interest rates and amount can be negotiated and reduced
Floating rate of Interest-All the banks provide education loan on floating rate of interest. This is beneficial for you also. Banks link their rate of interest to the base rate which goes on changing. Check the correct prevailing base rate and link it as specified. Whenever the base rate is reduced your interest rate will be reduced.
Parent as co-applicant-If your parent is co-applicant/co-borrower, interest may be reduced further by 0.25 to 0.50%. It will be a handsome amount in a range of 25k to 50k PA, assuming that you have taken a loan of Rs.10 lacs.
Relief in interest on regular re-payment- Some of the banks give relief to the tune of 0.5 to 1% in interest amount, if you regularly make repayment. It can save you an amount of Rs 50K to 1 lakh by the time the loan is fully repaid.
Working Professional- Working professionals getting admission in MBA at good B school can be further provided relief in interest by 0.25% by some of the banks.
Women MBA aspirants- In addition to above, if you are a girl student, you may be awarded further reduction in interest by 0.25 to 0.5%
Waiver of processing charges-Why to approach the banks charging processing fee. You can save at least Rs 5K, if you can avoid such banks and financial institutions. The logic behind waiving the processing fee is that Education loan is covered under priority sector loans and banks are not supposed to recover processing charges on it. If your bank is charging it, negotiate and ask them to waive the same. With a little effort you could get the same waived.
Q. Bank demands 5% margin amount from me? Can it be negotiated also?
Ans. You may approach such banks who do not ask for margin or reduce the amount of loan. Margin amount is your contribution to the total assessed loan amount. If you need an education loan for Rs.10 lacs, bank demands Rs.50k contribution from you. This margin amount is nil upto Rs.4 lakhs in all the banks but above that all the banks have their own schemes. Central bank and Union Bank do not need margin even upto Rs. 20 lakhs but SBI, PNB, Canara Bank, ICICI, Axis all need margin of 5%.
If there is a bank branch in the concerned B school campus, it may have special education loan scheme with provision of higher amount without any margin.
Expensive but affordable MBA
This is the fact that MBA is an expensive education. But added to it is another fact that once you get admission offer from one of the 13 IIMs or other top rated B schools like MDI, IMT, XLRI, SPJIMR, JBIMS, IMI, NITIE, there is no paucity of funds to pursue the course. The only need is that you should be smart enough to judge your requirements and find out the Bank offering the best deal.
Also Read:
10 steps to save you from falling into MBA Education loan Trap
Education loan for MBA, Think twice and negotiate with banks
MBA Education Loan: Get ready now to get the best deals on loan for MBA course
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