Margin Money in Abroad Education Loan: Key Factors Related to Nationalized Banks

Dreaming of studying abroad and considering an education loan from a Nationalized Bank? Great choice! But before exploring the various financial institutions, there’s one thing you absolutely must do—get familiar with the key terminologies of abroad education loans. 

One such term is Margin Money. Sounds technical? Don’t worry—we’ll explain it in the simplest way possible! In basic terms, Margin Money is the share of your educational expenses that you need to cover yourself. But why is this balance between your contribution and the bank’s funding so crucial, especially for public banks?

Stick around as we decode everything you need to know about Margin Money for education loans for abroad studies by Indian government banks. Let’s get started!

What is Margin Money in Abroad Education Loan?

When a nationalized bank offers an overseas education loan, it typically does not cover the entire cost of education. Instead, the borrower must contribute a certain percentage of the total expenses, which is referred to as margin money.

For instance, if your study program costs Rs. 20 lakhs and the bank has a margin requirement of 10%, you must pay Rs. 2 lakhs upfront while the bank funds the remaining Rs. 18 lakhs.

Margin money acts as a form of shared financial responsibility, ensuring that borrowers have a stake in their education funding.

Having understood the Margin Money concept, let’s look at the role of margin money in the loan disbursement.

Margin Money & Abroad Education Loan Disbursement

In nationalized banks, overseas education loans are usually disbursed in installments, matching the student’s academic schedule or specific needs. The margin money can be paid either all at once or in parts, depending on the bank’s policy. Some banks allow borrowers to pay the entire margin upfront, while others let them pay 10% with each installment of the loan. 

This flexibility makes it easier for students to manage their finances while the bank disburses the remaining loan amount directly to the institution.

Next, let’s explore how margin money is calculated for overseas education loans.

Calculation of Margin Money for Abroad Education Loan

The calculation of margin money involves a straightforward percentage-based formula.

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

Let’s consider an example:

• Total Cost: Rs. 30 lakhs (inclusive of tuition, living, and other expenses)

• Bank’s Margin Requirement: 15%.

Calculation:

Margin Money = Rs. 30 lakhs × 15% = Rs. 4.5 lakhs

Thus, you need to arrange Rs. 4.5 lakhs from personal resources, while the bank covers Rs. 25.5 lakhs. This calculation helps you plan your finances better and ensures that you’re prepared to meet the bank's requirements.

Having covered the basics of margin money, let’s see which public banks provide it.

Nationalized Banks Offering Margin Money for Abroad Education Loans

Several Indian Nationalized Banks provide abroad education loans with specific margin money requirements. 

The key ones include:

1. State Bank of India (SBI)

2. Bank of Baroda (BOB)

3. Bank of India (BOI)

4. Union Bank of India (UBI)

5. Punjab National Bank (PNB)

6. Bank of Maharashtra (BOM)

7. Saraswat Bank

These are some of the best bank for education loan abroad, with predefined conditions on margin money, as emphasized in the next section.

Margin Money Requirements by Nationalized Banks for Abroad Education Loans

Margin money is not tied to any specific abroad education loan scheme offered by public banks but is generally applicable to all. Take a detailed look at the funding ratios of banks and how much of the cost you’ll need to cover.

Even without an overseas education loan interest rate on margin money, arranging the required funds might seem challenging. We’ve covered practical solutions in the next section to help.

Strategies for Minimizing Margin Money in Abroad Education Loans

Reducing the margin money can make your education loan process smoother and less stressful. Here are a few practical tips to help you minimize the amount you need to pay upfront.

1. Use Scholarships to Your Advantage

Scholarships can greatly reduce or even eliminate margin money requirements.

For example, if your university fee is Rs. 10 lakhs, the bank usually finances Rs. 7 lakhs, requiring you to contribute Rs. 3 lakhs as margin money. However, if you have a scholarship, the bank offsets the margin with the scholarship amount, eliminating the need for you to pay margin money.

2. Strengthen Your Collateral

To lower your margin money, you can add extra properties as collateral or use investments like LIC Policies or Fixed Deposits to back your loan.

3. Keep Non-Essential Costs Out of the Loan

If the property value you’re offering as security is on the lower side, avoid including expenses like books, laptops, stationery, travel, or insurance in the loan. Keeping these costs out reduces the loan amount and your margin money.

4. Lower Your Living Expense Estimates

High living expenses mean a bigger loan and higher margin money. Avoid quoting expensive living costs, especially if studying in countries like the USA where expenses are often overestimated. Provide a modest but realistic estimate of your living expenses to keep your loan amount smaller and your margin money lower.

By following these simple steps, you can save a significant amount of money and make your abroad education loan more manageable.

Surprisingly, some public banks waive the margin money requirement in certain situations. How does that work? Let’s take a look.

Scope of 0% Margin Money in Abroad Education Loans

Some banks and financial institutions, including a few public sector lenders, offer 0% margin money in overseas education loans. This means the lender funds the entire cost of education without requiring any upfront contribution from the borrower.

However, the specific terms for 0% margin money vary across banks. Below are examples to help you understand these differences better.

Example 1: Bank of Baroda (BOB)

Bank of Baroda sets different margin money criteria based on whether the university falls under its Premier or Non-Premier list. 

• Premier Universities: 100% funding with 0% margin money.

• Non-Premier Universities: 90% funding with a requirement for 10% margin money.

Pro Tip: If you are unable to arrange the 10% margin money, it is advisable to shortlist universities under BOB’s Premier List to qualify for 100% funding.

Example 2: Union Bank of India (UBI)

Union Bank of India offers 0% margin money for secured loans if the property realizable value is more than the cost project. This means the bank provides 100% funding, and no upfront payment is required from the borrower.

Example 3: Saraswat Bank

Saraswat Bank follows a unique margin structure:

• Tuition Fee: 100% funding (no margin money required)

• Living Expenses: 85% funding with a 15% margin money requirement

These examples highlight how margin money policies can differ across banks. Selecting the right lender based on your financial circumstances and target university can significantly ease your study abroad financing journey.

If your chosen institution isn’t on the premier list or you’re unable to opt for a secure loan, don’t worry. You can still reduce your margin money by processing through Élan Loans. But how will Élan Overseas Education Loans help in this aspect. Here’s how.

How Can Élan Overseas Education Loans Help Reduce Margin Money?

By choosing Élan’s assistance for your abroad education loan, you can achieve faster approvals and enjoy reduced margin money requirements. Curious how we do it? Let us explain with an example.

Case 1: Adequate Collateral

• If your property’s realizable market value is Rs. 1.5 Crores and your total education cost (project cost) is Rs. 1.10 Crores, the bank sets the margin money proportion at 90:10.

• In this case, you meet the collateral requirement, and the process moves forward smoothly.

Case 2: Insufficient Collateral

• If your property’s realizable market value is Rs. 1.10 Crores and your education cost is Rs. 1.5 Crores, the bank increases the margin money proportion to 75:25 because the collateral isn’t enough to cover the loan adequately.

• This means you’d need to pay a larger portion upfront, which can be financially challenging.

In situations like Case 2, we step in to the following scenario.

1. Reduce Your Total Project Cost: Our team helps you cut down expenses by guiding you on legitimate ways to save, such as opting for affordable private accommodation and providing proper documentation for food expenses.

2. Prepare a Bank-Friendly Project Cost: Our Loan Experts ensure that your cost breakdown aligns with RBI guidelines, making it easier for the bank to approve your loan with the least margin money possible.

Team Élan doesn’t just help you get secure loans; our experts work to make the process stress-free and affordable. By reducing your expenses and presenting a well-structured loan application, you’ll not only save on margin money but also speed up the approval process.

Sounds exciting, right? So allow us to help you take one step closer to achieving your study abroad dreams by connecting to Élan Loan Experts for your Abroad Education Loan processing!