Getting an education loan is a great help for an individual to finance the cost of earning an MBA degree. Nonetheless, before you start filling in any application for GMAT, you need to have complete information about the process for applying for an education loan for MBA. Getting a good score on GMAT will help you get into top business schools, and then you have to bare the expenses of an MBA degree.
If you’re planning on applying for an education loan to help fund your degree after GMAT, you’ll want to be sure and familiarize yourself with the facts. MBA is not a cheap course, but you can always finance your expenses and fees through an education loan. However, before making any random decision, there are a few things that you should know about education loans for the GMAT.
How does Education Loan Work?
An education loan is no other than a long-term loan, which will be paid back for a certain period. Most of the time, the lender does not care about your credit history or how much income you have, and the amount of education loan you choose to take is completely up to you.
After applying for an Education Loan in India, two types of loans are available; one with a fixed interest rate and another with a floating interest rate. If you apply for an education loan with a floating interest rate, your monthly payments will change depending on the prime lending rate and your total debt at the time of application.
One thing you need to keep in mind is that an education loan is not a short-term loan. It will take approximately four years to pay back the education loan, and of course, you will pay it back with interest. Therefore, by getting an education loan, you are entering into a long-term repayment plan, and the total amount of interest will be added to your debt burden.
What To Look For While Applying For Education Loans?
There are three main factors that one needs to consider when picking the right time for applying for an education loan.
- Loan Amount
The first one is how much you’ll need to cover the cost of your education. If it’s not more than half of your total costs, then you can go for an education loan with a floating interest rate. Like any type of loan, education loans have interest rates attached to them and must be repaid with interest.
These study loans cannot exceed what is needed for the applicant’s entire degree. So, for example, if someone is applying to a master’s program at a university, they cannot use an educational loan as part of their application.
2. Duration of Degree Program
The second factor you need to consider is how long you plan to stay in a certain program. If you anticipate being in the program for four years or less, then an education loan with a fixed interest rate could help greatly. For MBA students, the program lasts for two years, and then students are placed in different companies. Then, once you find a job, you can start paying off your education loan.
3. Choosing Fixed Or Floating Interest Rate
More often than not, almost all of the lenders for education loans let you choose between a fixed or floating interest rate. Therefore, you will have an option to choose from this type of interest rate during the application process. A fixed interest rate makes your monthly repayment more predictable, but you will be paying back a larger amount of money in the range of $1,000 – $2,000.
If you plan on staying in the program for two years or less and want to keep your monthly payments low, then it’s better to go for an education loan with a floating interest rate. However, before applying for an education loan, you must have realistic expectations that this is not a short-term loan, and it can take anywhere from 4 to 5 years before you see your money.
Having an education loan is not only a great help financially but is also a great resume builder. If you have the opportunity to apply for an education loan after the GMAT, then go for it. However, if you cannot afford to pay back your education loan or you think you will run into a lot of financial troubles in the coming years, don’t take out the loan.