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Financing your MBA through loans November 12, 2006

Posted by InvisibleInk in MBA Financing / Loans.
8 comments

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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Verdict: HSBC International MBA Loan = A complete disaster October 6, 2006

Posted by InvisibleInk in MBA Financing / Loans.
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I have just got off the phone from HSBC international and they have decided to reject my loan application after two months of deliberation. Not even a revision, a straight rejection! No need to say how disappointed and frustrated I am about this. The fact that they dragged it for so long means that I now have a month before I have to pay my tuition fees and I am back to square one. I have called INSEAD and they suggested I apply to two other banks. Their rates are much higher and I have no guarantee if they will not do a last minute “ HSBC trick” on me either.

The annoying thing is most of my income was not even considered. Like many other people getting paid on performance based salaries, a substantial part of my income depends on how well I do or how much extra work I take on. From the bank’s point of view this is too much of a risk, so they simply discarded it. Having halved my salary, they also made several calculation mistakes on my expenses. For instance, forgetting to account for national insurance payments, treating six monthly electricity bill as a monthly figure, and the list goes on. Really, you would expect more from a bank. Meanwhile I was told that things were going on track and a few details could be worked on to get the amount I asked for. While I was fine tuned the details on their request, today, after all, they decided that they cannot provide me the loan at all. This is despite the fact that I now fit in their 60% income vs. expenditure rule even with my basic salary. When I asked to talk to the manager, I was told that 60% is not the only think they look at (which is complete rubbish as the person who has been dealing with my application up to this point clearly stated that this was the case). So they decided that since they cannot take security on the property I own, they would not give me the loan.

This is the first time I heard them mentioning the need to take on a security for my application. I was clearly guided up to this point that we were going ahead without such a requirement. I think this is really over the top. Let me tell you the bit that makes me the most disappointed. Apparently, Jersey laws (where HSBC International is based) prevent them from taking security on a person’s home, even if it is paid in full, if the person and/or the immediate family live there. Well, hello??? Did you not know this for the past two months? They knew every single piece of information about me since day 1, they simply either ignored it or they are really not up to scratch with financial regulations. Of course, there is also the argument about being in a good mood or a bad mood or the state of the weather on that day.

Anyway, in the end I join the club of dissatisfied (up to now a loyal) HSBC customers. Soon to convert all financial dealings to other bank. This is “how to loose a lifelong customer in a day”.

Time for a bit of logistics September 24, 2006

Posted by InvisibleInk in General, MBA Financing / Loans, MBA Prep / Logistics.
1 comment so far

Accommodation, check. Deposit, check. Profile on NetVestibule, check. Finances, not yet! For the past month I have been kept busy by INSEAD and HSBC. I finally got all my paperwork together and applied for an MBA loan at the end of August. Unfortunately, five weeks on, my application is still in progress. Might take a while before I know if I’ve got a loan. :/

I also managed to squeeze in 5 scholarship applications before the deadline. At INSEAD, there is no such a thing as offering candidates scholarship on the basis of their admission application. If you want to get funding, you have to write a separate essay for each scholarship you wish to apply. I guess they go with the idea that there is no such thing as a free meal! It can be a bit difficult to find inspiration for scholarship essays while juggling many things at the same time. In my case it meant writing three essays and a hasty copy paste job for the other two to meet the deadline. I’d be extremely surprised if I get short-listed for the last two. But I am very hopeful about one of the scholarships. To apply, you have to be a woman and from one of the few countries listed. The advantage of being in INSEAD, there are not too many women who fit the criteria. Also, I’ve got very good feedback from a couple of my friends on my essay. If I get it, it will cover €15,000 of my tuition fees. That would be nice!

On the other hand, my “to do” list is far from finished. I was checking the messages in NetVestibule (cyber INSEAD) and realised that I have to make a decision to attend the pre-MBA module as soon as possible. In the mist of sorting out my finances, I have totally forgotten that I have to make a decision and pay by 2nd of October. Unfortunately, I am still undecided about what to do. It costs €1200 plus accommodation and flights for a week’s course. I have got a degree in Management and Economics but that was long time ago and frankly I don’t remember much of it either. I think I would benefit from refreshing some accounting and finance topics along with statistics. Or, I could do some home study and use the time and money to go for a nice holiday before the programme kicks off. Hmm, interesting decision to make!

Cost of INSEAD MBA August 15, 2006

Posted by InvisibleInk in MBA Financing / Loans, Scholarships.
24 comments

Simply, higher than you think! Now that my accommodation for next year is sorted, I need to look into getting a loan and applying for scholarships. INSEAD MBA programme is not cheap. The tuition fees cost €45,000 and average living expenses are €22,500 (excluding campus exchange costs and deposits). According to one of my interviewers, five years ago the tuition fees were only €27,000. He said since then INSEAD realised that it is at par with the elite American MBA programmes and adjusted the fees accordingly. What a way to almost double the fees in five years! The fees are normally paid in three instalments. 10% within three weeks of being offered a place, 60% one month before the classes start, and 30% four months into the programme. So, I will have paid 70% of my fees in three months time, scary…

There are many hidden costs that INSEAD doesn’t talk about until you’re admitted. For instance, the optional pre-MBA classes cost an additional €1200. If you don’t already speak three languages at business level or above, you may need to take language tuition during your studies. This would cost you €495 per period (A period is two months in INSEAD). A supplementary module, outside of core classes and required number of electives, would cost you €2200. Moreover, you should budget a further €800 for books. If you have to hand back your laptop to work and buy yourself a new one, count that in as well. So in the end, we probably looking at almost €50,000. I know some other MBA programmes providing all of these extras at zero cost to their MBAs. They simply integrate it into their tuition fees. This makes it more manageable but clearly this is not INSEAD’s choice.

On the positive, the school has a good reputation, especially in Europe, and it helps when looking to get a loan. So far from my observations, HSBC International offers the most competitive MBA loan at base rate plus 2% (currently makes 5% APR). Depending on individual circumstances they can offer anything from €10,000 to €50,000 with payback period up to 10 years. There is no penalty for early settlement. If you are in the UK, don’t go for HSBC graduate loans (currently around 7.5% minimum and more limited in many ways), make sure to contact HSBC International. There is also decent number of scholarships available to INSEAD students. I counted 45 when I last checked. They range between €3,000 and €15,000, a couple of higher ones at around €22,500 mark. Although, each one of them is targeted to different nationalities and some are gender specific. For instance, I am eligible to apply to nine of them, however we have been strongly advised not to apply to more than five and students are only allowed to get up to two scholarships. Currently, 20% of the students are financing their fees through scholarships. I heard that INSEAD is actively looking to increase its scholarships so there may be even more funding available in the future.