Because of its knowledge-centric curriculum and excellent career opportunities, MBA is one of the most popular courses among students aiming to pursue higher education outside the country. The course fee for MBA programs is relatively high making student loans indispensable in enabling the students to pursue their career without any constraints. Borrower’s academic background, co-borrower’s financing capability, collateral etc. are mainly the deciding factors for the loan approval and determining the interest rate.
The borrower should be an Indian citizen.
Most of the lenders provide loans to the borrowers in the age group of 16-35 years.
The candidate must have a good academic record.
The co-applicant/ guarantor must be either primary (parents, spouse, siblings) or secondary (father-in-law, mother-in-law, brother-in-law, paternal/maternal uncles/aunts).
He/she should have a valid score card (GMAT, CAT etc.)
The USA, which is the market leader in education today, has two distinct sets of b-schools. There are private and public business schools, the fees charged by private b-schools (Rs.40-80 lacs) tend to be substantially higher than the public b-schools (Rs.60-70 lacs). Almost all the Banks in India (State Bank of India, Central Bank of India, Punjab and Sind Bank, IDBI Bank, HDFC Bank, Kotak Mahindra Bank, Canara Bank, Axis Bank) and some Non-Bank Financial institutions (Avanse, Credila, Auxilo etc.) provide educational loans for MBA in abroad. The loan schemes of different banks are known by different names to ascertain the various terms and conditions, maximum amount, a concessionary rate of interest, clubbing of co borrower, need of margin and security.
1. Rate of interest: 9.35% to 10.95%
2. Margin amount: 15-20% of the loan amount
3. Collateral security: Required for a loan above Rs.7.5 lacs
4. Processing charges: 1% of the loan amount
Some banks also provide education loan schemes. For MBA courses, the following education loan schemes are offered by State Bank Of India (SBI)
SBI Student Loan Scheme – It is offered to people who have already got admission in a course in India or abroad.
SBI Global ED-VANTAGE Scheme – It is offered exclusively to people who want to pursue full-time courses in universities outside India.
Maximum loan amount: As per offer letter from the B school
Rate of interest: 12.10% -14%
Collateral security: Not required for loan amounting 7.5 lacs
Margin amount: 15-20%
Processing charges: 1% of the loan amount
Maximum loan amount: No limit depending upon the B-school fee and expenses (secured loan), and up to 20 lacs (unsecured loan)
Rate of interest: 11.5%-14%
Margin amount: Nil
Collateral security: Required as per the quantum of loan account
Processing charges: 1% of the loan amount
Before availing the loan, certain points should be kept in mind: -
1. Firstly, a bank loan (from public or Private Bank in India) will cover only a part of the tuition fees and has a high margin.
2. For business schools in the USA, loans can be provided with or without collateral. Banks provide up to 7.5 lacs loan amount without collateral, while NBFCs like Avanse can provide loan amounting up to 20-25 lacs.
3. Another critical factor would be comparing interest rates. Interest rates of private banks and NBFCs (11-14%) are always higher than public banks (9.20-11.75%)
4. Loans from NBFCs like Avanse, Incred, Auxilo etc can cover full tuition fees, while banks leave a margin of 15-20% which must be covered by students.
5. The interest rates are floating in nature, and processing fees will be valid as well (1 – 2% of the total loan amount) and the repayment structure is flexible which starts after the moratorium period.
6. Some banks and NBFCs even offer pre-admission loans if the GMAT/GRE score and the student’s profile is impressive which can help with securing a Confirmation of Admission at their chosen University.
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