InvestorQ : What is a margin in relation with an education loan?
Gauravi Patel made post

What is a margin in relation with an education loan?

Swapnil Sarang answered.
2 years ago

Most Indian banks generally fund up to 90% of a student’s education expenses as loan and some even provide loans for 100% of education expense.

However, the exact loan amount an applicant is eligible for depends on a range of factors. These can be the monthly earning of the parent/legal guardian; the value of collateral provided; applicant’s academic record, among other factors.

Margin is the amount that a student needs to pay himself/herself and the rest is paid by banks.

So, let’s suppose a student needs a loan of Rs 100,000 and the bank is ready to finance 80 per cent (Rs 80,000) of the loan amount then the student will have to make arrangements for the remaining 20 per cent (Rs 20,000). In this case, Rs 20,000 is the margin amount.

Many banks have a margin for loans, which means that they will provide between 75 per cent and 90 per cent of the total cost of the course; you will have to pay the balance.

The scholarship amount, processing fee (if any) and insurance premium on the Life Insurance Policy (paid by the bank) can be included in the total loan amount for the purpose of calculating the margin.

The margin requirements on education loans are not very rigid. The industry norm is generally 5 per cent for studying in India and 15 per cent for studies abroad, for amounts exceeding Rs 4 lakhs. These, however, are indicative figures, and vary from bank to bank.