If you want an education loan and go to any government bank, you will hear about loan margin or education loan margin money. But only a handful of students know about this loan margin or margin money in education loans. Not to mention, many students misunderstand the concept of margin money in education loans. In this blog, we will discuss the margin money in education loans in detail. Without any further ado, let’s get started.
This Blog Includes:
What is Margin Money in Education Loan?
The education loan margin is known as the specific contribution brought by the students in terms of their overall expenditure. The minimum loan margin is 10% and public-sector banks need to follow it.
For instance, you choose a bank for your education loan and they set the loan margin at 10%. This means that the bank will provide an education loan covering 90% of your expenditures. You will pay the rest 10% of your education expenses. Keep in mind that you need to share your amount of money with the banks. Then they will provide you with the loan.
How Can You Calculate Margin Money?
Now that you know the basic concept of education loan margin money, let’s move on to know how you can calculate the margin money properly from your education loan.
As mentioned earlier, most government banks such as PNB, SBI, etc. have a 10% margin money meaning that they will cover the other 90% of the education loan.
However, there are other different cases where the margin money in education loans would be calculated differently. For instance, suppose you’re applying for an education loan of 50 Lakh. As an applicant, you want to pay an account of 20 Lakh. In such cases, the bank would increase the overall education loan margin money to 40%.
What Do You Need to Know about Margin Money?
Understanding the margin of money is undoubtedly one of the most important things you need to consider. However, there are some specific crucial things you should know about margin money:
- Education loan margin money is the amount that the applicant needs to pay towards their expenses of studying abroad.
- The loan amount will be divided into phases. Additionally, the margin money would also be paid periodically as per the loan amount.
- The percentage associated with margin money is not constant. The percentage can decrease or increase depending on the loan amount as well as your capability of paying the margin money.
- There are some banks that provide students with 0% margin money.
How Margin Money is Calculated?
The banks will cater to 90% of your education loan and the rest will be paid by you. Therefore, if the total expenses of your education loan are Rs. 50 lakhs and you apply for the same loan amount, the bank will cater Rs. 45 Lakhs of your education loan, which is 90%. The bank will expect the applicant pays the rest of Rs. 5 lakhs as it’s 10% of the total amount.
This is the process most government banks follow while calculating the education loan margin money. The scenario explained above is the perfect case, where you’re applying for a loan amount similar to the education loan. But keep in mind that many students misunderstand the terms and conditions associated with the margin money.
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Which Banks Offer Margin Money?
Most government banks offer margin money in terms of education loans. But keep in mind that the percentage of the margin money education loan is fixed by the banks.
|SBI||Global advantage: 10%
Student loan: Maximum 4 Lakhs: NIL
More than 4 Lakhs: 15%
|BoB||Maximum 4 Lakhs: NIL
More than 4 Lakhs: 5%
|ICICI Bank||Maximum 4 Lakhs: NIL
More than 4 Lakhs: 15%
|Axis Bank||Maximum 20 Lakhs: NIL
More than 20 Lakhs: 5%-15%
Relation of Margin Money to Other Expenses
The margin money is directly related to the overall expenses of the education loan. The lower the amount of the education loan, the higher the margin money would be. If you’re an applicant who wants to go to the USA for higher studies, banks will double the money while calculating the overall expenses which will decrease the overall amount of education loan margin money for the students. This might not seem fair as the overall expenses mentioned in the I-20 is always greater than the actual one.
How Does Margin Money Work?
Remember that the policies associated with the margin money depend on the bank you’re choosing. The percentage for the education loan margin money is not fixed and it can vary. The 10% margin money from the banks is the bare minimum. Most of the time, the percentage increases. Depending on the collateral value as well as the loan amount of the total expenses, the banks can increase the overall percentage required for the margin money. It doesn’t matter which bank you choose, the overall percentage for the margin money won’t go lower than 10%.
What Does It Mean by 0% Loan Margin?
Many private lenders offer students with 0% loan margin in terms of unsecured education loans. Additionally, depending on your criteria, there are some specific public-sector banks that will provide a 0% loan margin on secured loans.
But if a student goes to a bank that offers a 0% loan margin, would they be able to leverage the benefits of the same?
Even though the answer is yes, it will still vary and depend on a couple of factors. If a student applies for 60% coverage on their education loans, the loan margin would be 40%, not 0%.
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There are some banks that provide 100% education loans without any margin money. However, there are also some banks that pay a maximum of 90% of the education loan in terms of your total expenses.
You need to pay the margin money once your education loan gets sanctioned.
Yes, you can. But keep in mind that it will completely depend on the bank.
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