Pursuing MBA in top b-schools like IIM’s is a long term dream for many MBA aspirants. When it comes to the tuition fee in IIM colleges, the cost of education is very high and expensive compared to the other MBA colleges in India. In IIM b-schools the fee structure is in the range of 20 Lakhs to 24 Lakhs. For the middle-class people, it is really a huge amount to invest in education. It is very necessary to take an education loan to study MBA in IIM colleges. So, here in this article, we will discuss how to get an education loan for IIM colleges and the interest rate for the various banks in detail.
Is it worth to take a loan for IIM ?
It is definitely worth taking a loan for MBA education in IIM b-schools in India. As the tuition fee in top b-schools like IIM Ahmedabad, IIM Bangalore, IIM Calcutta, etc has increased, it is the best option to take an education loan for IIM. Apart from the tuition fee, there will be other expenses like student accommodation, transport and other expenses which are financially unbearable for a middle-class or a lower-middle-class people.
Almost all banks provide student loans to those who have a proven track record of academic success. Most banks are willing to lend up to Rs.30 lakhs to finance a student’s education. However, if you are an IIM aspirant, this sum will not cover the majority of your costs. As a result, many banks provide unique credit options to students who are qualified for admission to IIMs.
The interest rate on a student loan granted to an IIM candidate differs between banks and financial institutions. However, you can obtain an education loan with an excellent interest rate ranging from 8.5 percent to 10%. As a result, you can obtain a loan of up to Rs. 30 lakhs. Typically, the loan amount is determined by the college’s tuition fees, but some banks additionally grant additional funds for living expenses and other educational-related expenses. Furthermore, the loan moratorium period extends from 12 to 18 months after the course time.
Education loan for MBA without collateral security
Although some banks need collateral for loans over Rs. 10 lakhs, other lenders base their collateral requirements on your potential earnings. Even some of the banks like SBI need collateral and co-borrower for loans over 7.5 Lakhs based on the type of MBA college that the student got admission to. In the case of margin money, practically all banks do not charge anything, but a few of them want you to pay 5% (above 4 lakhs) of the loan amount out of your own pocket.
The IIMs, as one of the top-premier universities, offer some of the greatest management programmes but are also noted for their exorbitant costs. In the last two years, seven IIMs have raised their tuition by 5% to 29.6%. The usual fee structure at an IIM is between 12 and 25 lakhs. As a result, it is not always possible for students to fund such high tuition rates, making an education loan a better financial option.
Features for availing of a student loan for IIM
- A maximum loan amount of Rs.20 lakhs to Rs.30 lakhs is available to IIM students.
- Students at IIM have either very low or no margin money at times.
- The repayment duration is 15 years long.
- If you want to get a loan from one of the IIMs, no collateral is necessary, however, parents are usually required to become guarantors/co-borrowers.
- Students can also claim income tax benefits on educational loan interest paid under Section 80E of the Income Tax Act. This benefit is available in addition to the Rs. 150,000 deductions allowed under Section 80C.
- Banks such as SBI and Bank of Baroda provide female students with a 0.5 percent rate reduction on loans.
For students who want to pursue their studies at top-tier universities such as IIM, the interest rate on a student education loan is lower than that of any Type B or C university. Along with cheap interest rates, banks provide loan programmes with no margin, which expands your loan coverage to cover lodging and other expenses such as travel, books, and equipment fees.
IIM education loan interest rate for various banks in India
|Bank/Loan||Max Amount||Rate of Interest||Security||Margin||Moratorium Period||Repayment Period|
|IDBI Bank Premier Education Loan||Rs.20 lakhs||Base rate = 9.65%||Rs.4 lakhs to Rs.10 lakhs – Third-party guarantor
Above Rs.10 lakhs – Tangible collateral
|5% above Rs.4 lakhs||Course duration + 1year/6 months of getting a job, whichever earlier||Below Rs.7.5 lakhs – 10 years
Above Rs. 7.5 lakhs – 15 years
|OBC’s Customized Education Loan Scheme IIMs||Rs.15 lakhs||Up to 10.50%||Parents/Guardians as co-borrower||Nil||Course period + Grace period based on predefined conditions||Upto Rs.7.50 lakhs – 10 years
Above Rs.7.50 lakhs – 15 years
|SBI’s Scholar Loan||Rs.40 lakhss||Up to 10.20%||Parents as co-borrower||Nil||Course period + 1 year||15 years|
|CBI’s Special Education Loan Scheme to IIM Students (Cent Vidyarthi for IIM Students)||Rs.30 lakhs||MCLR = 12 Month||Assignment of future income||Nil||Course period + 1 year||15 years|
|BOI’s Exclusive Education Loan Scheme for Students of Premier Educational Institutions||Rs.20 lakhs Rs. 30 lakhs with 100% tangible collateral||MCLR = 9.25%||Assignment of future income + parents as co-borrower||Nil||Course period + 1 year||15 years|
|Union Bank’s Special Education Loan Scheme||Rs.30 lakhs||8.10%||Parents as co-borrower||Nil||Course period + 1 year||15 years|
|Axis Bank’s Education Loan||Rs.20 lakhs||8.85%||Collateral or guarantor depending on a case-to-case basis||5% above Rs.4 lakhs||Course period + 1 year||15 years|
|UCO Bank’s Super Premier Educational Loan Scheme||Rs.30 lakhs||8.40%||Nil||Nil||Course period + 1 year||15 years|
Premier college loans actually have lower interest rates than Type B or C universities. Almost all banks offer zero-margin prime loans, making not just tuition but also housing and other requirements cheap. So, if you’re thinking about abandoning your ambition of studying at one of the IIMs, keep in mind that loans for IIM students are just a click away.
SBI education loan for IIM
Compared to other banks, the State Bank of India is willing to lend up to 40 Lakhs for the education loan for MBA students who got admission to type-A colleges like IIMs. Below are some of the salient features that are provided in the student education loan for IIM in SBI.
- 100% Financing that includes Examination/ Library/ Laboratory fees, Purchase of Books/ Equipment/ Instruments, Travel expenses/expenses on the exchange programme, Purchase of computer/ laptop and any other expenses related to education.
- NO Processing Fee
- Repayment period of upto 15 years after Course Period + 12 months.
SBI collateral free education loan
State Bank of India provides collateral-free education loans for the students who got admission to top b-schools. For the type-C colleges below 7.5 Lakhs, there is no need of submitting the collateral for the education loan and the maximum loan amount for the C category colleges upto 30 Lakhs. Collateral co-borrower required for more than 20 Lakhs of education loan for the type A and B colleges and for the colleges of type AA there is no need to submit collateral below 40 Lakhs of education loan and also it is the maximum amount of loan that is lending by the SBI for education loan.
Things to consider before taking an education loan
- Compare the Interest rate in various banks. It is very essential to compare the data of various banks that are giving education loans and their terms and conditions to sanction the loan.
- Ensure the interest that the bank is applying is either simple interest or compound interest. Make sure to be it as simple interest.
- Moratorium Period and Repayment Period: These two parameters are to be considered while taking the education loan.
- Margin amount in education loan: Most of the banks are giving zero margins for the education loan. And it is also negotiable.
- For students who opt for an education loan for IIM, one can also check out the student loan calculator that is provided on the official websites of the respective banks like SBI, Union Bank of India, Axis Bank etc. So, aspirants or their parents are advised to check out the loan calculators to know more about the EMI details of the respective banks.
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