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Financing Your MBA

Posted on February 05, 2014
MBA Finance

Welcome to another week of Wednesday Wisdom. Today I’m going to talk about a question that is probably bothering people even before they get started with the whole GMAT preparation. The question is – How do I finance my MBA?

Essentially if you look at it, there are about 5 basic ways in which you can sponsor yourself:

1. Loans

Those that are offered by the college through banks with whom they have exclusive tie-ups. In short if you go to ISB, you probably have a dozen nationalized banks which are waiting to give you a loan. Or if you were to go to a top school in the U.S. such as Harvard or Stanford, you definitely don’t need to worry about getting funding, i.e. getting a loan.
They usually have an exclusive tie-up. Many other schools, especially the ones which are slightly lower down the order, I would say starting rank 10 onwards, many-a-times, they don’t have such a tie-up which means they would probably be able to give you 20-30% but not the 100%. But that is the number one option, especially for a top school.

2. A loan from India

The loans from India are collateral and non-collateral. Non-collateral loans can be offered against your admission to a top B-school, but typically their cap is somewhere less than INR 10 Lakhs, maximum. But typically around 5 to 6 lakhs. If you look at collateral loans then pretty much you know the interest rates that typically work and it is going to be against property that you will mortgage. The upper limit however, could be very high depending on what is it that you have mortgaged.

3. Self Finance

This is something that a lot of people ignore. But when you look at self finance, you’re going to look at every little thing. You don’t look at just the bank account but you also look at mutual funds, provident funds, maybe gratuity. You’re looking at all the money you have invested in other places like bonds or fixed deposits. If you have a bike or a car which you sell, you can get money out of that.
If you are living in a rented house you probably have a deposit so you can get the deposit back. It could be something even as simple as liquidating an asset on OLX, it sounds stupid but really a lot of people sell off electronic stuff they have got and may not use. So you could possibly look at getting money that way.

4. Soft-Loans

Something that a lot of people do not consider. Typically you get a soft loan from friends, family and what is known as “fools”. But really you want to get a loan from someone who can lend you about 5-10 Lakhs for a couple of years and you really have your word of honour. It’s maybe an uncle in London who can give you 10 Lakhs and you can always pay him once you start working.

5. Scholarships

What happens in scholarships is that a lot schools offer scholarships but just that you cannot bank on your MBA just by scholarships. You have to be a little careful with that one. Having said that, a lot of schools which especially after the rank of 15, 20, if you have a very high GMAT score and if your profile is very good, offer substantial scholarships.
We have had students at CrackVerbal, and I’m happy if you contact us, we can share some profiles where they have got as much as 70-80% of their tuition expense waived off. Which meant that their MBA was done in maybe around 20 Lakhs. So there are scholarships, for example there is a Reliance-Stanford scholarship which offers 100% of your Stanford MBA in return of you coming back to India and working here. There are some clauses you might want to look at, but scholarships are definitely an option that you could consider.
In a nutshell, 5 things – You either get a loan from a bank that the college is tied up with. You get an Indian loan against collateral, or no collateral. Third, look at self finance. Fourth, look at soft-loans from friends and family and fifth scholarships.
Thank you and if you have any questions, feel free to comment we’ll be glad to help you. Thank you! 🙂
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  1. Which qualities an applicant must have in order to get a good scholarship in the range of 70-80 %. What kind of work experience and GMAT score s/he have?

    1. Hi Vikas, to be eligible for a good scholarship you must have a GMAT score that is above 700. Also, scholarships mostly have a separate essay that you must answer in order to be short-listed for a scholarship. Your profile also makes a huge difference to your selection criteria. Take some time out and think of any such instance where you added value to a particular project. Don’t just talk about an NGO experience or a startup experience. Talk about what you achieved and learnt from it. Work experience should meet the B-school norms, there is no specific work experience for candidates to eligible for a scholarship.

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