With the cost of education on a steep rise, careful financial planning is crucial for aspirants of higher education from India and abroad. In addition to tuition fee, living, travelling and other related expenses form a substantial part of the complete cost of education. These expenses must be planned for in advance, and very well taken care of, through a study abroad education loan. However, the financial terms surrounding education loans may confuse some students and their parents. One such term is Margin Money.
So, what is margin money in education loan? In simple terms, margin in education loan refers to the amount of money required to be paid by the borrower. So keep reading, as this blog will cover all your queries on margin for education loan, and all things related to it!
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Margin Money Explained
So what is margin money in education loan? When it comes to education loans, margin money is a certain percentage of the complete cost of education the borrower is required to pay from his/her own funds. The remaining amount is then paid by the bank in the form of an education loan. This borrower contribution has to be paid on a pro-rata basis as and when the disbursements are taken from your education loan provider.
Let us take an example to understand what is margin in education loan.
For instance, your cost of attendance for studying abroad totals up to 10 Lakhs, and a bank states that their loan margin is 10%. This means that the bank will pay 90% of the total amount, which is 9 Lakhs, and the remaining 10% i.e. 1 Lakh, which is the margin amount in education loan, will be paid by you.
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The borrower contribution in the form of margin on education loan can be in the range of 10%-25% for studies in India and abroad. While most banks have made margin money a mandate on education loans, financial institutions like HDFC Credila offer education loans without any margin money.
How to Calculate Margin Money?
After understanding what is margin in education loan, let us now move on to know how to calculate the margin in education loan.
Most of the public banks like the SBI Bank, Bank of Baroda, etc have set their loan margin as 10%, meaning the banks will pay 90% of the loan amount.
There are, on the other hand, many different cases wherein the margin amount in education loan is calculated quite differently. One such case is when supposedly, your total expenses cost upto around 50 Lakhs. You, as an applicant, are willing to pay an amount of 20 Lakhs on your own, meaning 40% of the total amount. In this case, the bank will increase your margin money from 10% to 40% automatically.
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Things to Know about Margin Money
Let us now move on to some essential things related to margin money for education loan:
- Loan margin is the amount of money paid by an applicant towards his/her total expense to study abroad.
- The percentage corresponding to the margin in education loan is not at all foxed. It can increase or decrease, on a case by case basis. The percentage also depends on the banks you choose.
- The loan amount is disbursed in phases, or periodically. And, the loan margin can also be paid periodically in phases, simultaneously with the loan amount.
- There are also some banks that offer a 0% margin in education loan.
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To conclude, as a study abroad aspirant willing to study at some of the top universities across the globe, it is essential to understand your expenses. A loan amount corresponds to your total expenses to study abroad, and margin money will also depend, and thereby vary with the same. The margin on education loan also changes on a case by case basis, and definitely varies with the type of banks you get your loans sanctioned from.
To know more about margin money, and how you can reduce the margin for education loan, you can even connect with our Yocket Loan Assistance program!
Frequently Asked Questions about Margin Money
Ques. What is margin amount in education loan?
Ans. Margin money is a certain percentage of the complete cost of education the borrower is required to pay from his/her own funds.
Ques. Do I have to arrange my margin money immediately?
Ans. No, as a study abroad student, you can simultaneously deposit your margin money as and when the loan amount is deposited. You can disburse the margin money either semester wise, or year wise.
Ques. Are there banks that offer a 0% margin money?
Ans. Yes, there are banks available that offer a 0% margin monet, and pay 100% of your expenses as the loan amount.
Ques. When can my margin money increase?
Ans. Your margin money can increase when you are yourself ready to pay more than the required percentage of margin. For instance, a bank sets a margin of 10% on your loan amount of 50 lakhs, and you are ready to pay 20 lakhs, i.e. 40% of the total expenses. Your margin money automatically rises from 10% to 40%.
Ques. Which bank offers 10% margin money?
Ans. SBI has set its margin amount on education loan as 10%.
Ques. Which bank offers 0% margin money?
Ans. HDFC Credila through HDFC bank offers a 0% margin money for study abroad applicants.