For a first-time loan applicant, it can often be confusing to understand some of the technical terms associated with lending. One such term is that of 'margin money', which comes up in the education loan context as well. Read on to know everything you wanted to understand about this concept!
What is Margin Money?
Margin money, or the loan margin is the portion of the loan that is the student’s own contribution while availing an education loan. Simply put, this is the money that you would need to pitch in from your end, towards your total education expenses.
How does Margin Money work?
Typically, most lenders do not finance 100% of your education expenses, and request for a percentage of margin money from your end. For instance, if the loan margin is set at 20%, you would be able to avail an education loan towards the balance 80% of your expenses. Let’s take an example: A student has a loan requirement of INR 80 lakhs, with a margin money requirement of 20% as per their lender. This would require the student to furnish INR 16 lakhs, while the lender would provide the balance amount.
How does one pay Margin Money?
The margin money requirement means that the student would need to arrange for funds prior to your lender disbursing the loan for the balance amount. There are two ways in which this can be done, of which one involves directly paying your university or college the amount and sharing the receipt with your lender. Post this, the lender would release funds towards your education loan from their end. The other option is for the student to credit the money to the lender, after which the lender would transfer the entire sum to the student’s university or college.
What else should you keep in mind?
Often, it is difficult for a student (and their parents) to provide the margin money since it could mean dipping into family savings that could instead be preserved for the future. This makes it crucial to select your lender carefully, to ensure that you get up to 100% finance in order to fund your higher education with ease.
An Education Loan with No Margin Money requirement
When you avail an education loan from HDFC Credila, did you know that you do not need to provide margin money? Your loan offers up to 100% finance, which includes college tuition fees as well as ancillary expenses such as living costs, travel, purchase of study equipment etc., allowing you to achieve your higher education dreams without having to worry about finances.
Apply today and get started on your education journey!