An education loan offers a perfect opportunity to achieve academic aspirations without depending on anyone. These days, students prefer funding their education independently to earn a self-made badge. According to RedSeer, the overseas education cost is estimated to touch USD 80 billion by 2024, which is currently at USD 28 billion. Furthermore, as per the Ministry of Statistics and Programme Implementation, the education inflation rate in India back in 2021 was 1% which has now increased to a whopping 4.12%.

The rising cost of education never stops young learners from accessing quality education, thanks to education loans. If you want to turn your dreams into reality, you can also opt for a student loan. When you opt for an education loan, you have to consider various aspects, including margin money. So, what is this margin money, and how will it impact your student loan journey? Let’s discover together!

Margin money in education loan

When you opt for a study loan, some financial institutions will require you to arrange for margin money, which is your contribution to the total education cost. So, out of the total expenditure, you will be expected to pay a small percentage as a loan margin.

Let’s understand this with an example - Supriya aspires to finance her education by opting for a student loan. Her total cost for higher education, including tuition fees, accommodation, living expenses, travelling expenses, study material costs etc., is 40,00,000. However, she gained some work experience before pursuing her MBA and managed to save 2,00,000. So, she plans to pay 2,00,000 and opt for an education loan for 38,00,000. So 2,00,000 is the margin amount in education loan, i.e. Supriya’s contribution.

·         Pro-Tip: The percentage of margin money will differ depending on the lender you select. So, ensure you enquire about loan margin and other aspects such as education loan rate of interest, educational loan eligibility criteria and other benefits offered before applying for a study loan.

Benefits of margin money

The contribution in the form of student loan margin helps build creditworthiness which ensures a smooth education loan journey for the student. Secondly, if you offer margin money, it reduces the overall education loan amount too.

Mistakes to avoid when planning the education loan margin

·         Students often make a common mistake of assuming that the costs, such as tuition fees, are overstated. This may lead them to apply for a lesser amount and loan margin. So, to avoid this, it is best to use to College Course Expense Calculator to find the approximate cost of education. You can also try an Education Loan EMI Calculator to calculate EMI for education loan, as it will help you with the planning process.

·         If you apply for a lesser amount than required, your financier may assume that you are planning to arrange the loan margin for the remaining amount. Hence, it is advisable to get clarity on the loan amount you will need.

·         Also, the margin percentage will depend on multiple factors, such as expenses and collateral, if any. So, it will be calculated case-to-case basis. So, speak to your preferred education loan partner to gain clarity.

 Will I not get a student loan if I cannot offer margin money? 

You don’t have to worry if you do not wish to contribute toward your education loan, as some student loans come with a 0% margin. At Avanse Financial Services, we believe nothing should stop students from achieving their academic aspirations. Therefore, we provide up to 100% funding for your course, so we do not charge a margin amount.

So, now that you know what margin money is, you can plan your education loan wisely. If you do not wish to offer any margin money, there is no need to fret as we, at Avanse Financial Services provide 100% funding. So, Avanse education loans cover the holistic cost of education, including tuition fees, accommodation costs, living expenses, study material expenses, cost of learning devices and other education-related costs, so that you can focus on your higher studies and leave your finance-related worries to us.