Wed, 6 Jul 2022

Loan lowdown

Posted on Monday, July 7, 2008

Financing an MBA degree is a matter of concern for many. However, this process can be much easier than most think. Marie Field gives you the lowdown on how to acquire a loan to fund your business education

Every year, TopMBA surveys nearly four thousand aspiring MBAs around the world to establish whether finance is likely to prove a barrier to study. The latest survey found that most MBA aspirants had seriously looked into how they would fund their education at a business school. From scholarships to personal loans, a wide variety of options were cited. The following table depicts the results of the survey conducted among MBA aspirants in India. A remarkable 86 per cent of those surveyed reported that one of the sources of funding they expect to obtain is a loan.
Sources of funding

Company Sponsorship
Own Savings
Parents/ Family

Source: QS TopMBA Applicant Survey 2006
However, in spite of this awareness many students are unsure about where to start when it comes to obtaining financial aid, especially loans. Indian nationals have access to a wide range of educational loans geared to fund MBA studies. The State Bank of India, Allahabad Bank, State Bank of Mysore, and Bank of Baroda are few of the many banks that offer financial aid to prospective MBAs. In most cases, candidates will already need to have secured a place at a recognised institute and may need to supply a guarantor, such as a parent or close relative with sufficient funds to cover the loan.
What will your loan cover?
In most cases, loans will pay tuition costs and housing, in addition to library fees, book purchases, travel expenses, and often the purchase of computers that you may need to complete your course work. Exact loan amounts and interest rates vary, so do your research thoroughly and contact a variety of financial institutions before making your final choice. The following loan specifications from the State Bank of Mysore are a good indicator for those wanting to apply for loans-
  • Studies in India - Minimum Rs 10000, maximum Rs 7.50 lakh
  • Studies Abroad - Minimum Rs 10000, maximum Rs 15 lakh

Loan amount interest rate
  • Around 11.75 per cent pa for loans up to Rs four lakh
  • Around 12.50 per cent pa for loans over Rs four lakh

What to consider before choosing a loan?
Loan repayment periods depend on the type of loan and the institution that it is obtained from. For instance, the Industrial Development Bank of India holds a two-year moratorium period, with loan repayment due within the following three years, that is, three years post MBA graduation. The State Bank of India, in contrast, holds a loan repayment period of five to seven years. While many public banks do not charge a penalty fee for repaying the loan early, some private institutions do, hence, it’s important to clarify repayment details before signing off the loan. Also, make sure to evaluate all your choices when it comes to choosing your payment options. For some, monthly payments will be easier to maintain, while annual payments may be preferable for others.
Word of Caution

Venkatraman Gopalakrishnan, a current student at the Tuck School of Business, in the US, has a bit of advice for Indian MBA aspirants planning to apply for a loan- “The loan I received was part of the admissions package for international students and the amount was based on the estimated self-funding ability at the time of admission. It was a relatively straightforward process that required me to declare my self-funding capacity. The loan approved, covered the first year's tuition and living expenses. The second year's loan too, was arranged by the school with minimum paperwork. Thus, it is advisable to those planning to apply for loans to keep their salary and income tax records handy in case it is required.”
Fixed vs Variable rates
Interest rates fluctuate, and whether this will be in your favour cannot be predicted. A wide range of fixed interest rate loans are available and are often a better option for students. Meeting a financial advisor should be the first step towards gaining all the information needed for choosing the right option for you.
Many other factors too should be taken into account before applying for a loan. For instance, you may not need to apply for a loan if you are eligible for a scholarship, or in a position to accept funding from an employer. Do your research and consider combining a few types of funding to maximise your MBA experience.


Most read articles

Exec MBA: Fast-track to growth?

Allowing executives to study and finish their studies side-by-side and absorbing them into higher po

MBAs- Raking in the moolah

In an era of financial insecurity and intense global competition, an MBA qualification is a safe hav

Loan lowdown

Indian nationals have access to a wide range of educational loans geared to fund MBA studies. The St

Work wise

Unlike for most educational courses, for an admission to an international MBA course, almost without

Back| Next

Most searched tags

HealthCare Journalism Photography Engineering Civil services exams Mass Media Management SCM Acting as career Bschool ranking MBA ranking Online Distance MBA Fashion and Design CAT


Why is there a need for reskilling of employees ...

There are three new aspects of reskilling identified – a) the CMD department as the new name of the erstwhile training d ...

MBA programme for women to restart career after a break ...

In order to provide a platform to women to relaunch their careers in the chosen fields post a career break, JobsForHer h ...

Skip traditional degree, vocational college in DU can make you more employable ...

College of Vocational Studies is the only Delhi University (DU) college offering seven different vocational courses. Voc ...

Opt for suitable certificate course to upgrade your expertise ...

Enhancing the skills is one of the sure-shot formulae to stay ahead of the competition in a workplace ...

Back| Next