Margin money is basically a term used in loan. Margin money is a percentage of the total loan amount that student have to pay himself/herself. Margin money in an education loan is basically a part of the total educational expense that student have to contribute. The higher the education loan amount, the lower will be the margin money.
Below is an example:
- Total education expenses: INR 50 Lakh
- Loan sanctioned by the bank: INR 35 Lakh
- Margin money (Student’s contribution): INR 15 Lakh
What is Margin Money in Loan by Different Lenders?
- Public Banks:Public banks like SBI etc provide education loans with collateral. These banks do not cover 100% of the education expenses.In this case the student has to contribute some percentage of the total cost. This percentage of total cost is referred to as margin money.
State Bank of India
Up to INR 4 Lakh – Nil
Above INR 4 Lakh – 10% – 15%
- Private Banks & NBFCs:Private banks, like ICICI Bank, Axis Bank, etc offer unsecured education loans. Private banks often have pre-approved lists of universities and colleges. They cover 100% of the education expenses. So there will be no requirement for margin money from the borrower.
- NBFCs like HDFC Credila, Avanse, Auxilo etc also provide unsecured education loans. Unlike private banks, NBFCs do not have pre-approved lists of colleges or universities. But the cover 100% of the education expenses, hence no margin money.
Government Schemes and Subsidies to Cover Margin Money
The Indian government offers several schemes to help students manage the financial burden of education loans, including margin money. These schemes and subsidies aim to make higher education more accessible, especially for students from economically weaker sections.
- Vidya Lakshmi Portal: The Vidya Lakshmi Portal is a platform on which students can apply for education loans and scholarships. It connects students with multiple banks and government schemes, helping them find loans with minimal or no margin money requirements.Helps to explore options like subsidies or low-interest loans.
- Interest Subsidy Schemes: The Central Sector Interest Subsidy Scheme (CSIS) is designed for students having a family annual income of up to INR 4.5 Lakh. In this scheme, the government pays the loan interest during the moratorium period (course duration + 1 year). This reduces the financial burden on student and his family.
- State-Level Subsidies: Many states offer additional education loan subsidies or scholarships for students pursuing higher education within India or abroad. These subsidies can help reduce the amount students need to arrange as margin money.