What is Margin Money on My Education loan?

Last Updated : May 27, 2020, 12:45 p.m.

The margin money is an amount you need to pay after the loan gets sanctioned. And the amount is not to be paid to the lender but to the educational institution. Your margin money would be reduced from your loan amount as it is not financed by the bank or a non-banking finance company (NBFC). As per the RBI guidelines, no margin is applied on your loan up to INR 4 lakh. However, for a higher loan amount, the margin money is 5% for inland studies and 15% for studies abroad. Read this post and know about it in detail.

How to calculate Margin Money?

To do the calculation of margin amount you can use the formula: {1-(sanctioned loan amount/overall expenses)*100}. Suppose the overall expense is equal to INR 40 lakh and the sanctioned loan amount is 33 lakhs. The margin percentage would be 7.5%, which means you need to pay the rest of INR 7 lakh by yourself. Your scholarship or assistantship can be included in the margin money. And the margin money is applied on a year-to-year basis as and when the loan is disbursed.

How to Arrange for Margin Money?

As a parent, you can look to play a part in your kid’s career by depositing your hard-earned money in a savings account or fixed deposits. The sooner you start putting your money the more time you will get to build a corpus. Choose a bank that offers the maximum interest rate on your fixed deposit. Also factor in inflation while looking to create margin money corpus.