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Financing your MBA through loans November 12, 2006

Posted by InvisibleInk in MBA Financing / Loans.
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I had a number of comments/emails on MBA loans, especially on HSBC, so I decided to write a post rather than answer them separately. For those counting on getting a loan from HSBC, please consider alternatives. In fact, apply to a minimum of two loans. From our intake, we only had three HSBC applications accepted so far (based on our intranet info). HSBC Int. has been the source of frustration for all of us, there have been countless complaint letters directed to INSEAD and HSBC to sort out the situation. INSEAD is looking into how to solve this issue for future intakes. They are concerned that HSBC is not meeting the quality and the standard that a prestigious business school such as INSEAD would require.

“When do you get to apply for it? i.e can you do it while you are still in India, or are you required to be on campus to be eligible to apply?”

You should apply ASAP. It took on average 10 weeks for HSBC to reject applicants. :o[ Many students found out the outcome of their applications 2-3 weeks before the fee payment was due. You don’t want to be this position by choice. It is simply too stressful. I recommend that you have your options ready. If you apply to a couple of loans, you might be able to cancel your application if you hear from the other. Although, this is not something I have done so make sure to check the bank’s terms and conditions.

You can apply while you are abroad or at your home country. You don’t need to be at the campus. If you reside in a non-English speaking country, the banks will ask you to translate every single document you send to them and to get them certified. Some of my class-mates have spent over €200 in translation, certification, and posting.

“What are the main factors used by the bank to decide on the amount they are ready to release as a loan to a student?”

Honestly, this is a mystery. In fact, it almost works like a lottery. We simply don’t know. HSBC has an undisclosed ‘internal criteria’ that changed twice during last few months.

Although, I can give some advice based on my experience and what I heard from fellow applicants:

  • Make sure that you don’t have ANY loans or financial commitments under your name. Pay off your student loans, car loans, etc.
  • See my post on “Cost of INSEAD MBA” for how much you are required to spend in a year. Take all the optional expenditure out. Add €22,500 for living expenses. You have to show (also prove) how you will fund the gap between the loan you are applying for and the total figure.
  • If you can, get your family to write you a letter of support for covering your needs / unexpected expenditure. Include their pay slip/contract to prove that they can fulfill their promise.
  • In your application, you have to meet 60% requirement. This means that your expenditure (including your loan repayments) should not exceed 60% of your net income. To help you get there, do not include any expenditure that is not absolutely essential. You should also be able to verify this through the bank statements you are required to submit.
  • If you are British, don’t bother applying. I don’t know why but British people were told that they do not qualify.
  • If you reside in the UK, you may also encounter problems if you own a property and someone from your family lives in it or if you plan to live there after your MBA.
  • Call HSBC at least twice a week. You really really have to push them, otherwise they will leave your application to the side.
  • Double check that all the information you are giving is understood by the lending team. They DO make mistakes. It is up to you to chase them.
  • When you are getting documents translated and certified, make doubles. You wouldn’t believe how many people complained that their documents were lost by HSBC. They had to redo the whole thing again and again. Save yourself time and money, be prepared.
  • Finally, have A LOT of patience. This is one of the most annoying thing you will have to do in your life.

“What is the average time taken to pay off these loans from past students’ experience?”

I was told that for €50,000 loan, it typically takes an INSEAD student 2-3 years to pay it all off. Obviously, this depends on your personal circumstances.

ALTERNATIVES TO HSBC INT. LOAN:

This is not an exhaustive list but hopefully enough to give an idea..

  • UK: As long as you have been in the UK for 3 years, you can apply to Nat-West MBA Loan Scheme (http://www.insead.edu/mba/admissions/ukfa.htm)
  • France: Some of the French banks offer loans to international students as well, as long as you can either give an international bank guarantee or have a French consignor (same link as above, but navigate through to France).

    Andy (one of the students) provided an excellent summary of what an international guarantee stands for: ” If your bank agrees to supply a bank guarantee they guarantee the other bank that they take care of all payments, if you do not pay back your loan to the loan provider. So the loan provider has no risk at all”. So, if you default the re-payment as your guarantor bank will be legally liable for payment. Apparently, bank guarantees are very difficult to obtain in US and India.

  • US: If you can find a consignor (US permanent resident) you might have access to a private loan in the US. Intl. students in US can apply for private loans for schools which are TERI approved. INSEAD is TERI approved. Some options are:
    http://www.mbaloans.com/graduate-student-loans/private-loan.php
    http://www.salliemae.com/im_applying/MBA_LOANS_Signature_loan_checklist.htm
  • Singapore: Citibank in Singapore will offer you 6 times the monthly income of a guarantor, who needs to be Singaporean or singapore resident. interest rates around 6-7% and deferral of principal payment up to 4 years.
  • Finally, have a look at http://www.insead.edu/mba/admissions/fin_aid.htm for funding options in your country.
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Comments»

1. Arvind - November 12, 2006

Thanks for all your help 🙂
Given that I will be applying for round 2 deadline of the Sep 2007 intake, I may be left with about 4 months to get my finances ready. I’ll start psyching myself about it from right now, so I have some momentum on my side by the time it comes to the real thing.

2. Time - November 12, 2006

Thanks for the information. Which other banks other than HSBC would you recommend? I am a R1 applicant of the programme beginning Sept 2007.

3. InvisibleInk - November 16, 2006

Time, It really depends on where you are living as you may have different options available to you. Many students find it easier to get funding from local banks in their home countries (this is the case for me as well) as most foreign banks tend to ask for security or co-signors. Other than the list I provided above, it is really difficult for me to make comparisons. I haven’t heard any songs of praise for a particular bank yet, but if I do I will definitely share it here.

4. INSEAD - My Student Loan at Société Générale « Chega de Saudade - November 23, 2006

[…] I decided to post this message as other MBA students were having problems with their loans. See HERE. […]

5. Easwara - October 10, 2008

What are the options for funding a loan from banks in India? Do you know of any bank that would be ready to fund such a huge amount?

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