Now that Rinki has finally got admitted and started in the BM program in XLRI, I thought it will be a good idea to update the readers on the final outcome of it. I hope some of you have read the earlier posts on the considerations of Education loan and how I went about deciding on the same. If you have not read those posts, maybe you want to do so now.
To give the background of the costs involved in XLRI BM program and my thought process in going for the loan, let me outline the basic aspects:-
- Total cost of the course for payment to XLRI is 21.04 lacs. Assuming some expenses for travel and other personal needs the total requirement will probably be 22 lacs.
- My understanding with both my children has always been that I would take care of their Graduation costs, irrespective of the expenses and if they wanted to do a Post Graduate education they would be responsible for it. Rinki was always comfortable with this approach and knew that she will be taking up an Educational loan.
- The XLRI BM program which she got into is the most expensive program of it’s kind in the country and several banks approached her for giving the loan up to 25 lacs.
- As i was uncomfortable about paying a high amount for interest, I wanted to pay part of this 22 lacs on my own. Rinki could pay it back, based on her situation after she finished squaring off the loan with the bank first.
- I had to pay the initial 5.42 lacs for confirming the application in April. Apart from this there are 2 other instalments in 2016 that I plan to pay.
- So I was looking Rinki to take a loan of 12 lacs. The rate was 9.45 % floating based on the MCLR at present.
We had been approached by several banks as soon as she got an offer from XLRI. Though most of them had similar terms, we preferred SBI Scholar loan as Rinki already had an SBI account in her name which she could use. All banks were fine with having any one of the parents as a co-borrower, irrespective of their income levels. We decided to have Lipi as the co-borrower as it involved far less documentation that way. All the documentation needed as per the checklist was collected by us before we left Hyderabad for Jamshedpur.
The loan process itself was very smooth in Jamshedpur XLRI branch of SBI. We were very impressed with the branch manager for the way he and his staff ran the branch as well as his personal accessibility. The process was efficient in checking the required documentation and for people who needed help in filling up the form, people from the bank stepped up quite willingly. Yes, it was business for them but you do not see such levels of service even in many private banks.The branch manager was available to clear any doubt. For example, I was told that we should take the second instalment money from the bank as the sanctioned loan had to be activated within 3 months. I was uncomfortable with that as it would increase the interest burden considerably. When I approached the Branch manager he told me to take a small amount as a loan and pay the rest through our own resources.
The sanctioning of the loan was done on the same day which was fairly amazing. The repayment duration Rinki has chosen is 5 years. Assuming she takes the entire 12 lacs, the EMI will come to about 26000 Rs. Given the jobs she will be aiming for, this should not pose an issue. In fact, she is keen to pay off the loan early if she can. The overall interest burden is about 3 lacs plus and as there is no pre-payment penalty, paying off the loan amount early will go a long way in reduction of this amount.
As far as the amount paid by me is concerned, I have told Rinki that she can look at it after she finishes her bank loan. In reality, I have a different plan for this but that can be taken up later on when the time comes.