How To Get Education Loan For IIM? Compare Interest Rates

by Pankaj Singh Fri 14 Jun 2024 11:54 AM 397
how_to_get__education_loan_for_iim

How To Get Education Loan For IIM: MBA education costs are getting higher. It has been rapidly increasing and now it is somewhere between 20L to 30L. Because of this, it's becoming harder for students from middle and lower-income families to afford it. There comes the saviour for students which are loans from banks and financial institutions that can help in this situation. Today, we will discuss all about the education loan process for IIM and also about the interest rates by different banks.

How To Get Education Loan For IIM?

The Indian Institutes of Management (IIMs) are the best MBA Colleges in India but have very high tuition fees for their main programs. In the last few years, 9 out of 21 IIMs have increased their fees by 5% to 29.6%.

The current fees for the flagship PGP programmes are Rs.25 lakh at IIM Ahmedabad, Rs.24.5 lakh at IIM Bangalore, and Rs.31 lakh at IIM Calcutta. Now these are huge amounts for someone who comes under Economic Weaker Section. So, to afford such a high fee, students often end up taking loans. 

Taking a loan to cover your expenses at IIMs is a better option than paying all the money at once. Most IIMs have a list of financial institutions that offer loans for their students on their websites. Almost all banks offer student loans to students with a good academic record. Most banks are willing to provide up to Rs.30 lakh for education. However, if you are aiming to study at an IIM, this amount may not be enough to cover most of your fees. Therefore, many banks offer special loan options for students admitted to IIMs.

Should you also take a loan?

Most students take a loan for their education. The interest rate for these loans is from 8% to 13%, depending on the bank and college. For all IIMs, the interest rate is usually on the lower side and covers many costs, including tuition, books, laptops, and monthly expenses. The loan processing period can be from 1 day to 2 weeks. Many banks set up booths at the college during registration to process loans quickly. You can take out a loan for the full or part of your education fees, and even get reimbursed if you pay before the loan is processed. There is no need for a mortgage; you can get the loan without a co-borrower or guarantor, just in the name of the student.

Key Features of MBA Education Loan

  • The maximum loan amount for IIM students can range from Rs.20 lakh to Rs.30 lakh.
  • Every loan has a moratorium period, during which you don't have to start repaying the loan.
  • No collateral is needed for most top-tier loans, but parents usually need to be guarantors or co-borrowers.
  • These loans have a repayment period of up to 15 years, with typically no prepayment charges.
  • The margin is either very low or zero for premium education loans.
  • You can get tax benefits on the EMI paid under Section 80E of the Income-tax Act, 1961.
  • Female students get a 0.5% interest rate concession on some loans.

Expenses Covered Under MBA Education Loan

An Education Loan for an MBA usually covers most of the expenses during the two-year program. However, it may not cover minor expenses like books, field visits, and library subscriptions, depending on the lender. You should clarify these details before applying for the loan. Here's what MBA student loans typically cover:

  • Tuition fees: The loan generally covers the cost of the MBA program, including admission, tuition, and other college fees.
  • Living expenses: The loan also covers living costs such as accommodation, food, and daily expenses.
  • Travel expenses: If you're going for exchange the loan usually covers travel costs. You can discuss and negotiate these details with the lender.
  • Health insurance: For overseas education, health insurance is mandatory. The loan will cover the cost of health insurance to protect against unexpected health issues.

Documents Required While Applying for MBA Education Loan

  • KYC Documents: These include identity and address proof. A passport, Aadhar Card, or Voter ID card can serve as identity proof, while a utility bill can be used as address proof.
  • Bank Statement: You'll need a bank passbook or bank statement from the last six months.
  • Admission Letter: You should provide a copy of the admission letter from the institute, along with the fee structure and payment schedules.
  • Education Certificates: The bank would want to see your academic records to check your performance and educational history. Be ready to provide copies of mark sheets and certificates from SSC, HSC, and your degree programs.

MBA Education Loan Interest Rates, Securities, Moratorium Period & Repayment Period of Various Banks

Bank/LoanMax AmountRate of InterestSecurityMarginMoratorium PeriodRepayment PeriodProcessing Fees
IDBI Bank Premier Education LoanRs.20 lakhBase rate = 9.65%Rs.4 lakh to Rs.10 lakh - Third party guarantor5% above Rs.4 lakhCourse duration + 1year/6 month of getting a job, whichever earlierBelow Rs.7.5 lakh - 10 yearsNil
Above Rs.10 lakh - Tangible collateralAbove Rs. 7.5 lakh - 15 years
--
OBC's Customized Education Loan Scheme IIMs, IITs & XLRIsRs.15 lakhUp to 10.50%Parents/Guardians as co-borrowerNilCourse period + Grace period based on predefined conditionsUpto Rs.7.50 lakh - 10 yearsNil
Above Rs.7.50 lakh - 15 years
SBI's Scholar LoanRs.40 lakhUp to 10.20%Parents as co-borrowerNilCourse period + 1 year15 yearsNil
CBI's Special Education Loan Scheme to IIM Students (Cent Vidyarthi for IIM Students)Rs.30 lakhMCLR = 12 MonthAssignment of future incomeNilCourse period + 1 year15 yearsNil
BOI's Exclusive Education Loan Scheme for Students of PremierRs.20 lakh Rs. 30 lakh with 100% tangible collateralMCLR = 9.25%Assignment of future income + parents as co-borrowerNilCourse period + 1 year15 yearsNil
Union Bank's Special Education Loan SchemeRs.30 lakh8.10%Parents as co-borrowerNilCourse period + 1 year15 yearsNil
Axis Bank's Education LoanRs.20 lakh8.85%Collateral or guarantor depending on case-to-case basis5% above Rs.4 lakhCourse period + 1 year15 yearsNil
UCO Bank's Super Premier Educational Loan SchemeRs.30 lakh8.40%NilNilCourse period + 1 year15 yearsNil

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5 things to consider before taking an MBA education loan

Before taking an MBA education loan, consider these five factors:

  1. Interest Rates: Compare interest rates offered by different lenders to find the most affordable option. Lower interest rates can significantly reduce your total repayment amount.
  2. Repayment Terms: Understand the repayment terms, including the loan tenure and the flexibility in repayment options. Longer repayment periods might lower your monthly payments but could increase the total interest paid over time.
  3. Loan Coverage: Check what expenses the loan covers. Ensure it includes not only tuition fees but also living expenses, travel costs, health insurance, and other associated costs to avoid financial surprises later.
  4. Eligibility Criteria: Review the eligibility requirements and documentation needed. Ensure you meet the criteria and have all necessary documents, like KYC proofs, bank statements, admission letters, and academic certificates, ready in advance.
  5. Prepayment and Moratorium Options: Look into the prepayment options and whether there are any penalties for early repayment.

Frequently Asked Questions

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