Yes, there is typically a margin or loan margin on education loans in India. The loan margin refers to the percentage of the total cost of education that the borrower is required to fund from their own resources, while the remaining percentage can be availed as an education loan. Here's how it actually works:
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Loan Margin Percentage:
The loan margin percentage can vary among lenders and is generally in the range of 5% to 20%. This means that the borrower is expected to contribute a certain percentage of the total cost of education upfront, and the remaining percentage can be financed through the education loan.
Total Cost of Education:
The total cost of education includes tuition fees, hostel fees, examination fees, books, study materials, travel expenses, and other related costs. The lending institution calculates the loan margin based on this total cost.
Borrower's Contribution:
The loan margin represents the borrower's financial commitment and responsibility towards their education. It ensures that the borrower has a stake in their education and encourages financial discipline.
For example, let's say the total cost of your MBA program is ₹20 lakhs, and the lender has a loan margin requirement of 10%. In this case, you would be required to fund ₹2 lakhs (10% of ₹20 lakhs) from your own resources, and the remaining ₹18 lakhs can be availed as an education loan.
Source of Funds:
The loan margin can be funded through personal savings, scholarships, grants, parental support, or any other legitimate sources. Lenders usually require documentation to verify the borrower's contribution.
When exploring education loan options, carefully review the loan terms and conditions offered by different lenders, including the loan margin percentage. It's advisable to discuss the loan margin requirement with the lending institution to fully understand their policies and eligibility criteria. Ensure that you have adequate resources or a financial plan to cover the loan margin amount, as it needs to be available at the time of admission or disbursement of the loan.
