Funding your MBA: Bank education loan cover most expenses, rates vary

The rate of interest charged on such loans is varies between 11% and 14%, and these loans are payable only after your studies are over and you begin to earn.

So how should you look at financing your MBA education? First, if you gain admission to a reputed institute, you should approach banks with whom your institution has a tie-up. These banks may offer loans at lower rates and may be more responsive. If you cant find such options, consider the bank in which your parent or guardian has an account or the banks that are in your locality. You can also apply on websites of some banks.

Recently, most large commercial banks have increased their educational loan portfolio. The total loan amount is generally upto Rs 10 lakhs for studies in India and Rs 20 lakhs for studies abroad. The process of applying for education loans has also been made easier. Many banks have started accepting online applications wherein you need to fill your details and the bank representative will get back to you. Let us answer a few important questions that MBA aspirants often raise.
Am I eligible for education loan?According to the norms prescribed by various banks, all courses having employment prospects are eligible for an education loan. Graduation courses, post-graduation courses, professional courses, other courses approved by UGC/Government/AICTE are considered for loans. So you should check if your institutes programmes have got relevant approvals from government bodies.

What all expenses are covered? Pursuing higher education may call for many expenses other than the course fee. Make sure you factor in these while applying for the loan. Banks usually cover following expenses while granting a loan:

Fee payable to college and hostel
Examination, Library, and Laboratory fee
Purchase of books, equipments, and instruments
Caution deposit, building fund, refundable deposit supported by Institution bills or receipts.
Travel expenses, passage money for studies abroad
Purchase of Laptops, computers-essential for completion of the course
Any other expenses required to complete the course- like study tours, project work, thesis etc.
Even the cost of a two wheeler is covered as part of education loan by leading banks.

What & When do I pay? Interest rates on the loans are generally on floating basis with respect to the banks benchmark prime lending rate (PLR). Generally all banks offer interest rates between 10.75 % and 14 % depending on the amount of loan taken.

Repayment is in the form of equated monthly installments (EMIs) and it generally commences one year after completion of course or six months after securing a job, whichever is earlier. The tenure can be from five years to seven years.
Educational Loan SchemesThe Reserve Bank of India has evolved an educational loan scheme to facilitate financial assistance to students seeking admission to private professional colleges to pursue the full time graduate/post-graduate courses. The scheme got effective from August 1, 1999. All public sector banks have been directed by RBI to provide educational loans to students who fulfil certain eligibility criteria.

Student will have to submit a certificate every year from the college authorities regarding fees payable by him. Loan amount will be remitted by the lending bank to the college concerned. Loan granted in each academic year may be treated as a separate loan account for determining rate of interest, security, etc.

The assistance from the bank should be available to the student for the entire duration of the course. The student will not be required to submit a fresh application for loan every year but will only submit to the bank proof of his continuing to fulfill the eligibility criteria.

Here are the snapshots of education loans provided by some of the leading banks, as on January 2009:

State Bank of India
Loan Amount:Need based finance subject to the repaying capacity of the parents/ students with margin and the following ceilings.

Studies in India - Maximum Rs.10 lakhs.
Studies Abroad - Maximum Rs.20 lakhs

Margin: Upto Rs.4 lakhs: No marginAbove Rs.4 lakhs: Studies in India-5%Studies Abroad-15%
Interest: 12.25%

Period of loan: The loan to be repaid in 5-7 years after commencement of repayment
Repayment:Course period + 1 year or 6 months after getting job, whichever is earlier.

IDBI Bank
EligibilityIndian Universities: For Post Graduate Courses: first class graduates.Foreign Universities:Proof of TOEFL, GMAT, GRE score card, and 1-20 admit card.Age of the applicant should not be more than 30 years for Indian Universities and 35 for Foreign Universities. Age of the parent or guarantors should be below 55 Years. The annual income of the family should not be less than Rs. 3 lakhs.

Amount of loan:

Studies in India - Maximum Rs.10 lakhs.
Studies Abroad - Maximum Rs.20 lakhs

Interest rates:Upto Rs 4 lakhs: BPLR 1% (12.50%)Above Rs 4 lakhs: BPLR (13.50%)
Repayment: The loan to be repaid in 5-7 years after commencement of repayment.
Period of loan: The loan to be repaid in 5-7 years after commencement of repayment

HDFC Bank Amount of loan:

Studies in India - Maximum Rs.15 lakhs.
Studies Abroad - Maximum Rs.20 lakhs

Repayment: Course period + 1 year or 6 months after getting job, whichever is earlier.
Period of loan: The loan to be repaid in 5-7 years after commencement of repayment

Rate of Interest: 13-14% p.a.

AXIS BankAmount of loan:
For studies abroad: Rs15 lakhs. For studies in India: Rs 7.5 lakhs
Rate of interest: 15.75%
Margin: Upto Rs 4lakhs -nilFor Studies in India- 5%.For Studies abroad-15%.

Repayment: Course period + 1 year or 6 months after getting job, whichever is earlier.
Period of loan: The loan to be repaid in 5-7 years after commencement of repayment.

So now that you are aware of offers and terms of education loan, here is a brief summary of interest rates on education loans provided by different banks:
Interest Rates on Education Loans

BANKS
AMOUNT
RATE of INTEREST

HDFC
India-15 lakhs, Abroad-20 lakhs
13-14%

ICICI
upto Rs. 4 lakhs
13.75%

SBI
India-10 lakhs, Abroad-20 lakhs
12.25%

PNB
India- 10 lakhs, Abroad-20 lakhs
12.25%

Allahabad Bank
India-10 lakhs, Abroad-20 lakhs
11.50-12.25%

Axis Bank
India- 7.5 lakhs, Abroad-15 lakhs
15.75%

Bank Of India
India- 7.5 lakhs, Abroad-15 lakhs
11.25-12%

Central Bank
India-10 lakhs, Abroad-20 lakhs
11.25%

Oriental Bank of Commerce
India-10 lakhs, Abroad-20 lakhs
11.50-12.25%

Union Bank
India-10 lakhs, Abroad-20 lakhs
12-12.50%

Vijaya Bank
India-10 lakhs, Abroad-20 lakhs
11.75%

Hope you are now more clear about how to fund your management education. If you ave any query, email to [email protected] and we will get it answered from experts.
Stay tuned to MBAUniverse.com for more news, updates, and expert advice on MBA Admissions 2009.

Source: Bank Websites as on January 2009; Subject to modifications