Questions to ask before borrowing money for business schoolChen Wan Lim
There are many ways of financing your dream of attending business school as suggested by our article on “Funding an MBA programme in Malaysia”. While some are fortunate enough to have the scholarship to fund the tuition fees and some are sponsored by their employers, some have to borrow money to finance their quest to achieve an MBA – nothing wrong with this! But before you head to the nearest bank to take a personal loan (banks in Malaysia do not have specific loans to finance education) to finance your dream, be sure to ask yourself these few questions before signing on the dotted lines.
Do I really need a loan from a bank?
Borrowing from a bank should be a last resort after you have crunched the numbers and determined that your current financial status will not allow you to pursue a Masters’ degree. If you do need a loan, try asking if you can take a loan from the company you are working with (provided the cost of financing which is the interest rate is lower than that of a commercial bank) or even, a loan from a family member.
How much should I borrow?
Ideally, you would want to only borrow for your tuition fees and not for living expenses if you are a part-time student. Remember that the interest rates for personal loan range from 4-12% per annum – you would want to borrow as little as possible.
What is the interest rate?
Interest rates for personal loans range from a low of 4% per annum to as high as 12% per annum. Depending on your eligibility, common wisdom suggests that you would want to go for a loan with the lowest interest rates. This of course, varies depending on the amount borrowed, duration and qualifications. Apart from that, you would need to determine if the interest rate is fixed or variable – fixed interest rates stay constant throughout the duration while variable interest rate changes according to interest rate movements.
What is the monthly repayment?
Besides getting the best deal on interest rates, what is more important would be the monthly repayments on the loan. There is no ideal percentage of monthly repayment to monthly income as lifestyles vary. Just keep in mind that the monthly repayments shouldn’t burden your existing commitments such as your mortgage and auto financings.
What is the expected return on investment on the loan?
After you have decided on the amount of loan and is convinced that you have obtained the best financing deal available to you, the next step is to ask yourself if the loan will yield positive returns. Perhaps the returns might not be monetary, thus you can ask yourself if the Masters’ degree you are pursuing will help in your career progression or will it value-add to your current work. Moreover, you could also ask if your newly acquired qualification will be able to get you a salary increment or a promotion.
How can I reduce my graduate school loan as soon as possible?
Chances are, if you were to repay your loan before the official duration of the loan, there will be some sort of a discount available in the form of interest savings – take advantage of this! As such, if you are employed, you should aim to reduce the outstanding amount as soon as possible and if you are a full-time student, perhaps you can consider part-time employment to help reduce the amount owed.
Basically, in Malaysia, there are no special loans available from banks for education purposes and that the cost of borrowing a personal loan is high. Nonetheless, if the benefits outweigh the cost, then there is no harm taking a loan to finance a graduate programme. Just be sure to cover all grounds and to do proper calculations before committing into a long term loan for your education.