Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > What is Margin Money in Education Loan?

Loan for Education

What is Margin Money in Education Loan?

What is Margin Money in Education Loan?

Are you considering taking an education loan to fund your higher studies in India? If so, it’s important to understand the concept of margin money. But, what is margin amount in education loan? The term “margin money” refers to the portion of the educational expenses that you, as the borrower, need to fund on your own.

To illustrate what is margin money in education in a better way, let’s consider an example. Suppose the total cost of your education is Rs. 10,00,000 and the margin money requirement is 5%. In this case, you would be required to contribute Rs. 50,000 from your own funds, and the education loan would cover the remaining Rs. 9,50,000.

It’s essential for students and their families to be aware of what is margin money in education loan and the requirements when applying for education loans.

Margin money in education loan: Meaning & how it works

Now that we have a basic knowledge on what is margin amount in education loan, let’s delve into its role in loan disbursement.

Here’s how it typically works:

Calculation of total cost:

Before applying for an education loan, you need to determine the total cost of your educational program. This includes tuition fees, accommodation charges, books, and other related expenses.

Determination of margin money:

The lending institution specifies a margin money percentage that you must contribute from your own funds. This percentage can vary based on factors such as the loan amount and the institution’s policies.

Loan amount calculation:

The loan amount is calculated by subtracting the margin money from the total cost of education.

Disbursement process:

The education loan is disbursed based on the approved loan amount. The funds are either released directly to the educational institution or provided to you, depending on the terms of the loan.

Use of margin money:

The margin money contributed by you is typically used to cover initial expenses or as a security deposit, depending on the requirements of the educational institution.

Repayment structure:

The repayment structure of the education loan is based on the disbursed loan amount. You are required to repay the loan amount along with applicable interest over an agreed-upon repayment period.

How to calculate margin in education loan: Formula & example

After what is margin money in education loan, now let’s explore what is margin in education loan example and its calculation. The formula for calculating margin money is straightforward:

Margin Money = Total Cost of Education × (Margin Money Percentage/100)

Let’s go through an example to illustrate this calculation. Suppose the total cost of education is Rs. 3,00,000, and the lending institution requires a margin money contribution of 15%. Using the formula:

Margin Money = Rs. 3,00,000 × (15/100)

Margin Money = Rs. 3,00,000 × 0.15

Margin Money = Rs. 45,000

Here, what is margin in education loan example would be Rs. 45,000. You would need to provide this amount from your funds, while the education loan would cover the remaining Rs. 2,55,000 (Rs. 3,00,000 – Rs. 45,000) based on the margin money in education loan and total cost of education.

Margin money policies by banks vs NBFCs: India comparison

When comparing margin money in education loan requirements among different banks and non-banking financial companies (NBFCs), there are a few factors to consider:

Loan amount vs. Margin money percentage:

Evaluate how the margin money percentage influences the loan amount. Different institutions may have varying percentages.

Total cost of education:

Check if there are any restrictions on the types of expenses considered in the total cost of education.

Flexibility and terms:

Assess the flexibility offered by each institution in terms of margin money payment and any variations based on the course or program.

Interest rates and repayment terms:

Consider the overall terms of the education loan, including interest rates and repayment periods, in addition to the margin money requirement.

Eligibility criteria:

Understand any specific eligibility criteria associated with margin money, such as the applicant’s income, credit history, or collateral requirements.

Margin money requirements: Public Sector Banks vs. Private Sector Banks

The margin money policies of public sector banks (PSBs) and private sector banks differ based on their respective approaches, ownership structures, and government regulations.

Here’s a general comparison:

Public Sector Banks (PSBs):

Government Influence: PSBs often have margin money policies influenced by government guidelines and regulatory frameworks.

Flexible for Social Objectives: Some PSBs may have more flexibility in margin money requirements for courses that align with national priorities or social objectives.

Government-Sponsored Schemes: PSBs may participate in government-sponsored education loan schemes with reduced or no margin money for economically disadvantaged students.

Interest Rate Subsidies: In some cases, PSBs may offer interest rate subsidies or concessions to certain categories of students, impacting the overall financial burden.

Private Sector Banks:

Market-Driven Approach: Private sector banks often adopt a market-driven approach, setting margin money policies based on their assessment of risk and profitability.

Varied Margin Requirements: Margin money requirements in private banks may vary widely based on the loan amount, course type, and the borrower’s creditworthiness.

Focus on Risk Management: Private banks may emphasize risk management, adjusting margin money requirements to mitigate potential loan default risks.

Customer-Centric Solutions: Some private banks may offer customized margin money solutions, considering the unique circumstances and financial capabilities of individual borrowers.

Strategies for minimising margin money

To minimise the margin money you need to contribute, consider implementing the following strategies:

Scholarships and grants:

Explore scholarships and grants that can help cover educational expenses and reduce the amount of margin money required.

Part-time work:

Consider taking up part-time work opportunities to earn extra income and contribute to your education expenses.

Negotiate with lenders:

Discuss flexible repayment plans with lenders that can help reduce the financial burden and margin money requirement.

Cost-saving options to lower education loan margin

Opt for cost-saving measures such as community college or online courses to reduce overall educational expenses.

Conclusion

In conclusion, understanding what is margin in education loan and how it influences education loans is essential to students and their families. By being aware of what is margin in education loan example and its requirements, you can plan your finances accordingly and ensure a smooth disbursement and repayment process. Remember to research different banks’ policies, consider government schemes, and explore strategies for minimizing the margin money required. Download the Tata Capital app today to apply for an education loan and get the best interest rates and repayment options.

Apply for Education Loan

Add wings to your dream. Apply for an Education loan!

Apply now
Popular Searches
Education Loan for B.Sc Education Loan for BA Education Loan for PhD What is Margin in Education Loan Education Loan for Nursing Vidya Lakshmi Portal Education Loans for Girl Students in India Courses Eligible for Education Loan Education Loan Against Property 10 Best Loan Apps For Students
More About Loans
Education Loan Documents required for Education Loan Education Loan Interest Rates Education Loan EMI Apply for Education Loan Education Loan Eligibility Creteria Education Loan After 12th Education Loan Disbursement Process Education Loan for Abroad Studies Education Loan Moratorium Period

FAQs

What is margin money in an education loan?

Margin money is the portion of education costs you pay yourself, while the lender funds the rest. If you’re wondering what is margin money in education loan, it’s essentially your contribution toward total expenses, as defined under education loan margin in India.

 

How is margin calculated in an education loan?

Margin is calculated as a percentage of the total course cost. For clarity, what is margin in education loan example: if fees are ₹10 lakhs and margin is 10%, you contribute ₹1 lakh, and the loan covers ₹9 lakhs.

Is margin required in all education loans in India?

No. Margin money in education loan applies mainly to higher loan amounts or overseas studies. Under education loan margin in India, many government-backed schemes waive margin for smaller loans or specific categories like female students or SC/ST applicants.

Can private banks or NBFCs offer 0% margin loans?

Certain lenders may provide loans requiring minimal margin money in education loan, though conditions differ. It’s essential to understand education loan margin in India and how it influences eligibility, repayment, and your overall financial planning.

 

Does margin money have to be paid upfront or in instalments?

Usually, margin money is paid proportionately as fees are disbursed, not entirely upfront. Understanding what is margin money in education loan helps students plan cash flow, since contributions align with each semester’s expense schedule.

Can scholarships/waivers replace margin money?

Yes, approved scholarships, fee waivers, or grants can often be adjusted against margin money in education loan. Under education loan margin in India, lenders may accept documented funding sources as the student’s contribution, reducing out-of-pocket costs.

Is margin money refunded after loan closure?

No. Margin money is not refundable because it’s your share of the education cost, not a deposit. Any what is margin in education loan example will show it as an expense paid directly to the institution, not held by the lender.

 

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Home Loan EMI Calculator

Business Loan EMI Calculator

Used Car Loan EMI Calculator

Two Wheeler Loan EMI Calculator

Loan Against Securities Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download