Anisha has done MBA in Marketing from NMIMS And Executive Management(PMNO) from Harvard Business School. She has been instrumental in growing CATKing Digital with her experience with Marico and Henkel in the past.
Education loan for MBA is available from almost all the banks and other specialized financial institutions in private and public sector including this list of MBA education loan provider Avanse, Central Bank of India, Credila, Dena Bank, IDBI Bank, HDFC, Punjab National Bank, State bank of India, Punjab & Sind Bank.
Here is the list of MBA education loan providers in India for students who wish to pursue their education in masters of business administration.
| No. | Bank Name | Max. Loan Amount (in Rs.) | Interest Rate | Repayment/Payback Tenure |
| 1 | State Bank of India | Up to 30 Lakhs for top IIMs and top-rung institutes | 9.35%-10.70% *Girls will have 0.50% concession | 7 to 12 years |
| 2 | Oriental Bank of Commerce | Up to 25 Lakhs for Category A institutes, Up to 10 Lakhs for Category B institutes | 10.25% to 10.75% *Girls and SC/ST category students will have 0.50% concession | Up to 15 years |
| 3 | Allahabad Bank | Up to 20 Lakhs depending on the institute | For IIMs: 8%, Others: 10% | 7 years |
| 4 | Bank of Baroda | 10Lakhs, up to 20Lakhs for premier institutes | 10.5% to 11.5% *Girls will have 0.50% concession Added concession of 1.00% for students of premier schools (IIM, IIFT, XLRI etc.) | 5 years |
| 5 | Canara Bank | Up to 20 Lakhs | 10.65% | 10 to 15 years |
| 6 | Axis Bank | Up to 10 Lakhs | 15% *Girls will have 0.50% concession | 7 years |
| 7 | Punjab National Bank | Up to 20 Lakhs | 8.15% to 8.75% | 10 to 15 years |
| 8 | IDBI Bank | Up to 20 Lakhs | 9.7% | 10 to 15 years |
| 9 | Avanse DHFL | Up to 10 Lakhs | 11.5% | 10 years |
| 10 | UCO Bank | No ceiling | 10.60% | 10 to 15 years |
| 11 | ICICI Bank | Up to 10 Lakhs | As decided by the bank upon amount usage. *Girls will have 0.50% concession | 5 to 7 years |
| 12 | HDFC Bank | Up to 10 Lakhs | 14.50% | 15 Years |
| 13 | Union Bank | 20 Lakh | 10.25% | 15 Years |
| 14 | Bank of India | Up to 30 Lakh | 9.95% to 10.45% *Girls will have 0.50% concession | 10 to 15 years |
| 15 | Central Bank of India | 30 Lakh | 9% *Girls and SC/ST candidates will have 0.50% concession | 15 years |
Compare MBA funding schemes of different banks
Education loan for MBA is available from almost all the banks and other specialized financial institutions in private and public sector including Avanse, Central Bank of India, Credila, Dena Bank, IDBI Bank, HDFC, Punjab National Bank, State bank of India, Punjab & Sind Bank
These loan schemes are known by different names to ascertain the various terms and conditions, maximum amount, the concessionary rate of interest, clubbing of co-borrower, need of margin and security. SBI has named its education loan scheme for premier B-schools as ‘Scholar loan scheme’ and SBI student loan; PNB has named it as PNB Pratibha and PNB Saraswati. But our prime objective is not to go for the name but to know where we can get maximum at a minimum interest rate.
Fee structure of top-rated B-schools can vary not marginally but there could be a huge gap in the fee structure of 2 top rated B-schools.
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Number of Institutions: There are 20 IIMs in India, each with its own fee structure. Additionally, other prestigious B-schools like IIFT, SPJIMR, MDI, NITIE, IMT, IMI, among others, also have their own fee structures.
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Range of Fees: The fee structures vary widely among these institutions. For example:
- Newer IIMs: Fees range from Rs. 12 lakhs to Rs. 14 lakhs.
- Older IIMs and top B-schools: Fees can go up to Rs. 21 lakhs.
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Uniformity in USPs: Despite the differences in fee structures, these institutions often offer similar unique selling points (USPs) such as quality faculty, industry exposure, networking opportunities, and strong alumni networks.
If you can get a learning experience and Mix more or less at the B-school offering MBA/PGDM at lower fee structure, there may not be any need to pursue your MBA from an institute asking for the high fee and other expenses. MBA colleges including many top B-schools have kept their admission process flexible with the number of fee concessions available to compete and grow in the MBA education market. Once you try and understand the process, you may get pleasant surprises in your favor than you expected to arrange the funds for your MBA education. As the time draws closer for offer letters from B-schools to arrive after GD/PI results, several MBA aspirants cringe and back out while making the investment of their lifetime in B-schools because of their skyrocketing fees.
Since the fee structure with other parameters like faculty, infrastructure, programme structure, and placement could be stated as the base to choose the B school, take the decision as per the past USPs of the institute instead of paying more.
HDFC Bank:
- HDFC Bank offers education loans with preferential interest rates for reputed universities.
- Maximum Loan Amount: Up to Rs. 20 lakhs
- Processing Fees: Up to 1.5% of the loan amount
HDFC education loans can be availed before the student has secured an admission at the university. Borrowers enjoy flexible security collateral. Co-borrowers can be living in a different city than the borrower, but they can only be relatives of the borrower.
State Bank of India
Here's the information about State Bank of India's education loans presented clearly:
State Bank of India Education Loans:
- Eligible Courses: International higher education for job-oriented professional and technical graduate as well as postgraduate degree courses. Examples include MBA, MCA, MS, diploma courses at reputed universities, etc.
- Expenses Covered: The loan covers various expenses including tuition fees, exam fee, lab fee, library fee, caution deposit, books and equipment cost, travel expenses, etc.
- Maximum Loan Amount: Up to Rs. 30 lakhs
- Collateral Security: Required for loans above Rs. 7.5 lakhs
- Loan Margin: 15% for SBI education loan borrowers
- Interest Rate: Up to 2% on the current base rate of SBI
- Repayment Tenure: 1 year to 15 years
SBI offers a moratorium period where the entire interest can be repaid so that when the actual loan repayment tenure starts the monthly installment can be just the principal amount. The borrower has to submit college admission letter, completed loan application form, course costs, co-applicant details and other KYC documents to the bank.
Axis Bank
- Eligible Courses: Technical, professional courses, or career-oriented courses.
- Expenses Covered: The loan covers various expenses including hostel fee, tuition fee, book cost, etc.
- Maximum Loan Amount: Up to Rs. 20 lakhs
- Minimum Loan Amount: Rs. 50,000
- Interest Rate: Ranges from 16.5% to 17.5% with special rates for women
- Loan Margin: Not required for a loan below Rs. 4 lakhs. For loans above Rs. 4 lakhs, 15% has to be brought in by the borrower
- Processing Fee: None
Education loans require a parent or guardian to act as a co-applicant, with third party guarantee or collateral security, if applicable. Axis Bank might also consider LIC policy for 100% of the loan amount but it depends from case to case.
Punjab National Bank
PNB Udaan is a special education loan scheme for Indian students planning to study abroad. The loan is available for students who have got admission for graduate or post-graduate courses varying from diplomas, job-oriented professional or technical courses, CIMA/CPA courses etc. The PNB loan covers university fee, travel expense, exam fee, lab fee, library fee, book/equipment fee, and other related expenses.
- Maximum Loan Amount: PNB sanctions loans according to the requirement of the borrower.
- Loan Margin: 15% for loans above Rs. 4 lakhs. For loan amounts below Rs. 4 lakhs, the loan margin is not required. Assistantship and scholarships can be added to the loan margin.
- Interest Rate: Base rate for pursuing an education at the top 200 universities across the world.
- Moratorium Period: Up to a year with no prepayment charges levied by the bank.
- Processing Fees: 1%
- Tenure Options: Up to 15 years.
Bank of Baroda
Under the Baroda Scholar scheme, admission secured for professional and technical courses at reputed foreign universities are sanctioned for education loan.
Loan Details:
- Maximum Loan Amount: Up to Rs. 20 lakhs
- Loan Margin Requirement: 15%
Repayment Tenure:
- Loans up to Rs. 7.5 lakhs: Repayment within 10 years
- Loans above Rs. 7.5 lakhs: Repayment within 15 years
Borrowers can get a holiday or moratorium period of six months to one year after getting employment. Security is not required for loans below the amount of Rs. 4 lakhs. Third party guarantee is required for loans between Rs. 4 lakhs and Rs. 7.5 lakhs and a tangible collateral security are required for loans above Rs. 7.5 lakhs.
Canara Bank
The Canara Bank education loan covers university fee, travel costs, exam fee, lab fee, library fee, book/equipment fee, and other related expenses. Education loan has to be taken with a co-borrower and 100% collateral security is required for loans above Rs. 7.5 lakhs.
- Maximum Loan Amount: Up to Rs. 20 Lakhs
- Loan Margin: 15% for loans above Rs. 4 Lakhs
- Repayment Tenure:
- Up to 10 years for loans below Rs. 7.5 Lakhs
- Up to 15 years for loans above Rs. 7.5 Lakhs
- Security:
- Not required for loans below Rs. 4 Lakhs
- Third-party guarantee required for loans from Rs. 4 Lakhs to Rs. 7.5 Lakhs
IDBI Bank
The IDBI education loan covers university fee, travel, exam fee, lab fee, library fee, the cost of computers, book/equipment fee and other related expenses. IDBI Bank sanctions loan amount according to the requirement of the borrower, with no security on loans below Rs. 4 lakhs.
- Maximum Loan Amount: Up to Rs. 20 lakhs
- Repayment Tenure:
- Up to 10 years for loans below Rs. 7.5 lakhs
- Up to 15 years for loans above Rs. 7.5 lakhs
- Security Requirements:
- Third-party guarantee required for loans between Rs. 4 lakhs and Rs. 7.5 lakhs
- Co-borrower is required for all education loans
- 100% collateral security required for loans more than Rs. 7.5 lakhs
Avanse Financial Services
Avanse offers various kinds of loans like pre-visa disbursement loan, fast-track loan, pre-admission loan, and certificate of availability of funds. Borrowers have to submit their KYC documents, course fee, collateral documents, income documents etc. when they avail an Avanse education loan.
- Minimum Loan Amount: Rs. 1,00,000
- Maximum Loan Amount: Customized according to the borrower’s requirement
- Loan Tenure: Between 12 months to up to 120 months
Avanse education loan covers tuition fee, travel cost, living expense, books /equipment fee and other related expenses.
Watch your steps
Sometimes you spend more than you can afford and then struggle to pay off the loan getting compounded at a hefty interest rate. Remember, how alluring that education loan scheme might look, the repayment of it can take years of your life, to recover from. So be cautious while moving forward with your idea of taking education loan to pursue your dream MBA.
Step-1: Read and compare the schemes of different Banks
MBA education is expensive and you may need Rs.10 to Rs. 20 lakhs to pursue it. Find out which Bank can cater to your needs. If you need Rs. 20 lakhs and the cap for education loan of the Bank is Rs.15 lakhs, it will be a difficult situation and you will have to arrange additional Rs.5 lakhs from some other sources which may put you in multiple financial burdens.
Step-2: Choose the Bank where no margin is needed
There are some Public sector and private Banks who do not ask for margin amount on MBA education loan even for an amount as high as Rs. 20 lakhs, for example, Central bank of India, Union Bank of India, Avanse Financial Services. On the other hand, there are banks who will ask for a margin in a range of 5 to 10% on the loan amount exceeding Rs.4 lakhs. It is always better to confirm from the bank about their updated schemes since sometimes they also do not update it on their site.
Step-3: Prefer the one without processing charges
Some of the banks and financial institutions charge a one-time processing fee of Rs. 5000 or so or charges it in the form of 0.5% to 2% of loan amount. Most of the public sector banks have no such charges, especially on education loans. Still, you have to check whether it is charged by the Bank whom you are approaching and whether it can be waived. In most of the deserving cases, Banks can waive it also.
Step-4: Interest rate structure
Base Rate:
- The base rate is usually the base lending rate set by the bank.
Actual Interest Rate:
- The actual interest rate is determined by adding or subtracting a certain percentage to or from the base rate.
Example:
- Base Rate: 10.25% per annum
- Bank's Education Loan Interest Rate: 0.25% above the base rate
- Actual Interest Rate: Base Rate (10.25%) + 0.25% = 10.50%
Base Rate + 1.50% or 2.25% above the base rate, we are tempted to think that it means a very low interest but in fact, it is high enough.
Before applying for MBA education loan, you should check the base rate of the particular bank and then add the rate mentioned by the bank.
MBA Education is an expensive affair, and funding it is an equally challenging task as securing a seat in one of the top MBA Colleges in India. When it comes to funding your MBA education, be it in India or abroad, education loans are the most preferred and accessible option that students have. But, like any other loan offering, borrowing money always has risks associated with it. And MBA education loans are no different. There are many risks involved even in an MBA education loan, which can come to haunt you during your MBA course period or after that.
Therefore, to ensure that you pick the right education loan scheme and understand all the terms and conditions that go along with it, you can follow the simple 10 step guide given below.
What might go wrong with your MBA education loan?
An MBA education loan like any other loan is a debt that students can take up in order to fund their management education at premier B-schools like IIMs or other private MBA Colleges in India. However, because you are borrowing money from a bank or other non-banking financial institutions, you have to pay the interest on the loan amount. In case, terms of the loan agreement are not clear or not understood by you in advance, they can often become difficult to manage.
An MBA education loan has a moratorium period, interest rate, repayment terms and many other aspects that can often cause a lot of trouble to the students after the completion of the MBA course. In case the student is unable to repay the loan in time or misses out on an EMI there is a risk of other charges and penalties being added to the loan amount? This can often lead to a trap in which students often find themselves.
Therefore, to avoid such problems, later on, it is better if you opt for an MBA Education loan which can help you meet all the needs without being a liability in the future. The below given 10 step guides will help you do so, easily.
- Compare different Loan schemes
Today, many government and private banks along with a host of non-banking financial institutions offer education loans for MBA education. The terms and conditions on which MBA education loans are offered differ from one scheme to another. This is one to ensure a wide portfolio of education loans through which loans can be extended to different students as per their needs.
Therefore, before finalizing the bank or the lender from whom you would be taking the education loan to fund your MBA, you must gather all information about all the loan schemes available to you. Once you have information for different loan schemes, you can easily compare them and find out the one that is best suited to your needs.
- No margin money
The majority of lenders who offer education loan have designed their own matrix of top MBA Colleges in India and the courses they offer. Depending upon this matrix, the banks / NBFCs decide whether they can fund the entire MBA education, including tuition fee as well as other additional expenses or not.
If not, these banks would fund MBA education of a student partially and ask the borrower to arrange the margin money for the rest of the amount. However, this is not a norm and can be negotiated upon. There are many public sector banks and even some private banks that do not ask for margin amount on MBA education loan. As a borrower, you must always go for the education loan offer which doesn’t require you to arrange any margin money.
The majority of banks or lenders who deal in education loan, already have terms about margin money pre-decided and the same are available online on their website. Therefore, students seeking MBA education loan can check these and pick the best available option.
- No Loan Processing Fee
This one is pretty obvious. The majority of banks and NBFCs charge a nominal processing fee to process loan. And education loans for MBA courses are not an exception. The processing fee for an MBA education loan may differ from one bank to another; while some banks choose to charge in terms of percentage (in the range of 0.5% to 2%) of the loan amount many other levies a flat charge of around Rs 5000 or so. But, these charges are negotiable and can be waived off by the bank through negotiations. In fact, many public sector banks do not charge processing fee at all. And for deserving candidates, even private banks and NBFCs are known to waive off the processing fee for MBA education loans. You must always try and negotiate your way around processing fee.
- Evaluate Interest Rate Structure
Education loan for MBA course is a debt that you take up and you have to pay interest as a price for the borrowing. Every bank decides a base-rate on the basis of which they lend money to the borrowers. The final rate of interest for your MBA education loan is decided on the basis of the base rate. The final rate of interest can either be above or below the base rate depending upon the policy of the bank or the lender.
Generally, banks are known to declare interest rates for education loans as Base Rate + Additional Rate of Interest. For instance, if the base rate for education loans is decided at 9.25% by the bank and the bank scheme mentions interest rate to be base rate 0.25% above the base rate, the final rate of interest would be 9.50%. Before applying for MBA education loan, you should check the base rate of the particular bank and then add the rate mentioned by the bank. Many students often get confused about the base rate equation which is used to arrive at the final rate of interest and are in for a shock later on.
- Interest during Moratorium Period
Generally, education loans are provided with the grant of a moratorium period during which the borrower doesn’t have to pay back the loan amount. Simply speaking, a student taking up MBA education loan will not have to repay the loan during the moratorium period. But just because you do not have to repay the loan during this period doesn’t mean that the bank will not charge you interest for it.
Mostly, the moratorium period includes the MBA course duration plus the grace period granted by the bank before the repayment of the loan begins. However, at times, either due to omission or ignorance, bank officials end up entering the wrong moratorium period. Due to this, you will be charged compound interest even during the moratorium period. Therefore, you must ensure that the moratorium period is clearly entered in the system and only simple interest is charged on the loan amount during it.
To check if they are being charged compound interest rate during the moratorium period, students can log on to their internet banking account or check the loan account statement which is provided by the bank.
- Prefer Floating Interest Rate
Loans are extended to the borrowers by the banks at either a fixed interest rate or floating interest rate. Students should prefer opting for a floating interest rate as it can prove to be advantageous in the long run. A floating interest rate on MBA education loan means that the rate of interest rate will be revised on the basis of the changes in the base rate. This means, if the base rate is lowered, your effective rate of interest on education loan will also come down and vice versa. Therefore, students must always prefer an education loan that is offered on floating interest rate.
- Repayment during the Moratorium Period
In case MBA aspirants are able to start the repayment of their MBA education loan during the moratorium period, they can negotiate with the banks for easing the rate of interest. Some banks are known to reduce the rate of interest by 0.25% to even 1% for MBA students who opt to repay the loan during the moratorium period. The lowering of interest rate can substantially lower the financial burden on the students as far as loan re-payment is concerned. Therefore, students must always try to begin repayment of the loan early on, during the non-repayment period.
- Use Work-Experience to your advantage
Work-experience can be a big asset when it comes to getting admission to a number of top MBA Colleges in India. But, did you know that you work-experience can also get your concession on the interest rate on your education loan? Yes, you read that right; MBA students who have work experience can negotiate a reduced interest rate, generally in the range of 0.25% to 0.50%. So, make sure that you use work experience to your advantage to secure favorable terms for the education loan.
- Female candidates might get a better rate of interest
Top MBA colleges in India, especially the IIMs, are known to give promote gender diversity on their campuses by altering the terms of admission in the favor of female candidates. Similarly, a few of the banks or NBFCs also offer education loans for MBA courses on favorable terms to the female MBA aspirants. Female candidates who have secured admission to top MBA colleges can negotiate the rate of interest, moratorium period and other terms of the education loan with the lenders in their favor.
- Repayment Term
As discussed above, the repayment term for an education loan begins at the end of the moratorium period. Generally, the repayment term can range from 1 year to 9 years, depending upon the loan amount and other terms and conditions of the loan product being offered.
As a general understanding, MBA students prefer lower repayment period to end the cycle of debt soon. But, students must realize that the interest paid for education loan is exempted under income tax; and therefore, a longer repayment term might prove to be more beneficial to you. On the other hand, many banks also reward lower repayment term with a lower interest rate. So, you will have to take a judgment call on the repayment term, after determining which option will be more beneficial in the long run.
Education Loans, especially for MBA education, have become a norm for students nowadays. But, it is also equally important to understand all the aspects related to education loan before and the aforementioned 10 step guide will help you do so.
Conclusion
Although most of the financial institutions do not charge the prepayment penalty on education loans repayment. But you never know about the change in their policy. Just confirm this fact before applying. There is the number of competitors and competition among public and private sector banks is high enough. Find out if there are any hidden charges, understand their mechanism. The interest is usually charged on daily reducing balances, ask and confirm this fact from the bank. Do not allow either the Private or the Public sector banks to cheat you on any point. Instead of following the irregularities later, it’s better to nip in the bud. All parents dream about the best possible higher education for their children. Funding the rising cost of education is becoming increasingly difficult. We provide education loan to fund up to 100% of the cost of education.
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