Margin Money in an Education Loan

Table of Contents

1. What is margin money?
2. Why is margin money important for an education loan?
3. What to understand about margin money in loans?
4. Margin money requirements by major financial lenders
5. How do you fulfill margin money payments?
6. Frequently Asked Questions

Securing education loans can be a complex journey, filled with financial terms that might leave students feeling perplexed. One such term  is “margin money.” If you find yourself thinking about this financial jargon, its meaning, and how it pertains to education loans, then this blog is going to resolve all your questions about margin money, providing clarity to students seeking deeper expertise on their financial options for education.

Let’s begin!

What is margin money?

When dealing with education loans, margin money represents a specific percentage of the entire education cost that the borrower must contribute from their funds. The bank covers the remaining portion through an education loan. This borrower contribution is paid on a pro-rata basis as the education loan provider makes disbursements.

Illustration:

Consider a scenario where your total cost of studying abroad is 20 Lakhs, and a bank specifies a loan margin of 10%. In this case, the bank covers 90% of the total amount, equating to 18 Lakhs, while the remaining 10%, equivalent to 2 Lakhs, serves as the margin in the education loan and must be paid by you.

Prior to funds being disbursed to students, it is essential that they contribute their share of the money to the banks.

Why is margin money important for an education loan?

The benefits of margin money in education loans include:

• Shared Financial Responsibility: Margin money ensures that both the borrower and the lender share the financial burden of education, fostering a sense of responsibility.
• Demonstrates Commitment: Banks view margin money as a commitment from the borrower, reflecting their dedication to the education investment.
• Reduced Loan Amount: The contribution of margin money helps in decreasing the total loan amount, making the repayment terms more manageable for the student.
• Flexibility: Some institutions may offer flexibility, allowing borrowers to increase margin money contributions based on their financial capacity.

Students and their families or co-applicants must know about the margin money requirement when applying for education loans, as it impacts the amount they must arrange independently to cover educational expenses. The terms and conditions, including margin money requirements, can differ among various banks and financial institutions offering education loans.

What to understand about margin money in loans?

Comprehending the concept of margin money is crucial, and here are some specific key points you should be aware of:

• Education loan margin money is the part that the applicant needs to contribute to cover the expense of studying abroad.
• The loan amount is generally allotted in phases, and correspondingly, the margin money is paid periodically in line with the loan disbursement.
• The percentage to margin money isn’t fixed; it can range based on factors inclusive of the loan amount and your potential to contribute.
• Some banks provide students the choice of 0% margin money.

Margin money requirements by major financial lenders:

When comparing margin money requirements, take into account the following factors:

• Loan Amount vs. Margin Money Percentage: Evaluate how the margin money percentage affects the loan amount. Different financial institutions may have varying percentages.
• Total Cost of Education: Check for any restrictions on the types of expenses considered in the total cost of education.
• Flexibility and Terms: Assess the flexibility offered by each lender 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, which include interest rates and repayment periods in addition to the margin money requirement.
• Eligibility Criteria: Understand any specific eligibility criteria related to margin money, like the applicant’s earnings, credit score history, or collateral necessities.

For specific and correct information, reach out to the education loan departments of various financial lenders and inquire about their current policies and margin money requirements.

How do you fulfill margin money payments?

Meeting the margin money requirement involves arranging funds before your lender disburses the loan balance. There are two methods to accomplish this:

Direct Payment to Institution:

• Pay the specified margin money amount directly to your university or college.
• Share the payment receipt with your lender.
• The lender then releases funds for your education loan.

Transfer to Lender:

• Credit the margin money amount to your lender.
• The lender transfers the entire sum to your university or college on your behalf.

Frequently Asked Questions

What is the Loan margin meaning?

The margin money can be expressed as the percentage of the applicant’s contribution to their total expenses or the ratio of the total loan amount to the overall expenses.

Is the loan margin the same for all courses?

No, the loan margin requirement varies depending on the course being applied for. Some courses may have a higher margin money requirement than others, so it’s advisable to gather information from our loan experts regarding the margin money requirement for the specific course.

Is margin money obligatory? 

While some banks offer 100% education loans without requiring any margin money, others may provide a maximum of 90% of the education loan in relation to total expenses. 

Will a student loan be denied without margin money? 

There’s no need to worry if you’re unable to contribute to your education loan, as certain student loans come with a 0% margin. 

Is the required margin the same for all courses?

No, the margin requirement for loans varies based on the specific course. Some courses may necessitate a higher margin of money contribution than others.