Obtaining an education loan against Fixed Deposits (FDs) for your studies can be a strenuous process, especially when you don’t know where to start. Many banks in India offer education loans against an FD. However, the terms and features of an education loan with collateral from these lenders significantly vary. 

This article covers the list of top banks in India offering education loans against FDs, along with terms. We have also covered the key insights of these loans, including their pros and cons, eligibility criteria, documents required, and application process, to help you make a well-informed decision.

Education Loan against FDs(Fixed Deposits)

An education loan against an FD(Fixed Deposit) is a secured education loan where applicants pledge their fixed deposits as collateral for the loan. Both public and private banks in India accept FDs as collateral for their secured education loans. The loan amount offered for a student loan with FD varies depending on their lender and the FD value. Banks often offer a certain percentage of the FD value as the loan amount. 

Key Things You Should Know about Education Loans against FD

  • The FD should be on the applicant’s or co-applicant’s name to pledge it as collateral for an education loan. 
  • Banks consider the principal value of the fixed deposit for student loans.
  • Banks will hold the FD until the education loan is fully repaid.
  • Most banks do not consider 100% value of the FD for the education loan.

Pros and Cons of an Education Loan with Collateral 

As we have already discussed, a student loan against an FD is a type of education loan with collateral. Just as with any secured education loan, these loans also come with certain benefits and disadvantages. The following are the pros and cons of an education loan with collateral that you should be aware of when you are planning to obtain a student loan against FD for your education.

Benefits of an Education Loan With FD

  1. Higher Loan Amounts: Banks offer higher loan amounts for secured education loans. Depending on the bank and the FD value, you can obtain an education loan of up to ₹3 crores by pledging your FD as security for the loan amount.
  2. Low Interest Rate: Just like any secured education loan option, these are also offered at a relatively lower interest rate.
  3. High Approval Rate: Pledging your FD as collateral security for the student loan amount reduces the risk for the bank. This increases the chances of approval for your education loan against FD.
  4. Accrued Interest on FD: This is one of the major advantages of taking an education loan against FDs. When you create an FD and pledge it as collateral for your education loan, some interest will continue to accrue on the principal amount of your FD. This accrued interest on your FD reduces the interest burden on your education loan.
  5. Low processing Fee: Secured education loans from public banks often have a relatively lower processing fee. 
  6. Flexible Prepayment Policies: Another major advantage of an education loan against FDs is their flexible prepayment policies. Most public banks do not charge any prepayment penalties even if you close your education loan with collateral before the tenure ends.

Disadvantages of Education Loans against FD

  1. Repayment Tenure: The education loan repayment tenure depends on the FD maturity period. Your student loan tenure cannot be longer than the FD duration, limiting your repayment period.
  2. Risk of losing FD: If the applicants are unable to repay their education loans, banks can liquidate the FD to recover the loan amount.
  3. Loan Amount: Although banks offer higher loan amounts for secured education loans, the actual loan amount offered is often a certain percentage of the FD value. 
  4. Accessing the FD funds: You cannot fully access your FD funds until the education loan repayment is fully done and the loan is closed.

Top Banks offering Education Loans against FD

Many banks in India, public and private lenders, offer education loans against an FD. However, the terms and features of the loan significantly vary by lender. Here’s a list of public and private banks in India that accept FD as collateral for secured education loans, along with their features:

SBI Education Loan against FD​ 

The State Bank of India (SBI), one of the leading public banks in India, offers an education loan against FDs. Under its Global Ed-Vantage scheme, SBI offers both secured and unsecured education loans to students who want to pursue higher education in foreign countries. The SBI education loan against FD is known for its lower interest rates and flexible prepayment policies. An education loan with collateral in SBI covers various courses across several countries.

  • The maximum loan amount for an SBI education loan against FDs is up to ₹3 crores.
  • You can get an SBI education loan against an FD for both studies in India and abroad.
  • The moratorium period for an education loan with collateral in SBI is interest-free. However, students can pay simple interest if they want to.

Karur Vysya Bank Education Loan with Collateral

Karur Vysya Bank is one of the prominent private banks offering student loans in India. The bank offers secured education loans for higher education in India as well as abroad.  KVB education loans with collateral are known for their attractive interest rates and flexible repayment terms.

  • The maximum loan amount for a KVB education loan with collateral is up to ₹1.5 crores for abroad studies and up to ₹1 crore for studies in India.
  • KVB offers an optional interest payment to students during the moratorium period. This means that students are not necessarily required to pay interest during the moratorium period. However, they can pay if they want to.

HDFC Bank Education Loan with FD

The HDFC Bank offers secured student loans with no upper limit for students admitted into recognized foreign institutes for full-time courses. Education loans against an FD from HDFC Bank are known for their competitive interest rates and quick sanctions. The bank offers both student loans for higher education in India as well as abroad.

  • There is no upper limit for secured education loans for abroad education from HDFC. 
  • However, the maximum amount for an education loan with collateral in HDFC for studies in India is up to ₹1.5 crores.
    Interest is charged during the moratorium period.

Axis Bank FD Education Loan

Axis Bank is one of the leading private banks in India that offers an education loan against FDs. The bank is known for its diverse range of unsecured education loan schemes to help students in their studies abroad. The Bank offers doorstep service and a multi-currency Forex card under the education loan schemes to further assist the students in their education journey abroad.

  • There is no upper limit for an education loan with collateral in Axis Bank. 
  • An education loan against an FD in Axis Bank covers both undergraduate and postgraduate programs.
  • Interest is charged during the moratorium period

ICICI Insta Education Loan with FD

ICICI Bank is one of the largest private banks offering abroad education loans in India. The bank offers both secured and unsecured education loans for education abroad. The ICICI Bank Insta Education Loan feature allows students to get an instant sanction letter for their education loans. The bank offers a complete digital process for education loans.

  • The maximum loan amount for an education loan against FDs in ICICI Bank is ₹3 crores for abroad studies and ₹1 crore for studies in India.
  • An education loan with collateral in ICICI can be used for PG and UG courses.
    Interest is charged during the moratorium period.

Obtaining an education loan to fund your higher studies can be quite challenging, with many lenders offering varying terms. Contact WeMakeScholars, an organisation partnered with over 15 public and private lenders. When you apply for an education loan through us, our experienced team will help you find the most suitable loan for your education, according to your profile. Request a callback today to contact our team.

Collateral Margin for Education Loans against FD

Most banks do not provide loan amounts equal to 100% FD value for an education loan with a fixed deposit. They only offer a certain percentage of the FD value. Students should bring the rest of the percentage, also known as collateral margin. 

Example: 

  • Suppose you have pledged an FD of ₹15,00,000 for a secured education loan of the same amount. And your bank has a collateral margin of 10%.
  • This means that your lender will only consider 90% of your FD value for the loan and can only provide ₹13,50,000 for your education loan.

The collateral margin for an education loan against FDs varies from bank to bank. Here are the collateral margins for FD from different banks for education loans.

Bank Collateral Margin
SBI 0%
KVB 0%-10% (Depending on whether interest is paid or not paid during the moratorium)
HDFC Bank 10%
Axis Bank 10%
ICICI Bank 0% to 15% (Depending on the University)

Eligibility Criteria for an Education against FDs

The eligibility criteria for an education loan against FDs vary from bank to bank. However, the basic eligibility criteria laid out by the banks for an education loan with collateral  are: 

  1. Co-applicant: Students are generally required to have an eligible co-applicant to sign the loan agreement alongside them to be eligible for a secured education loan. The co-applicant eligibility for education loans varies by bank. 
  2. Citizenship: Both the student and the co-applicants should be Indian citizens.
  3. Admission Status: The student should have secured admission at a recognized university.
  4. Academic History: Students are expected to have a good academic history with at least a 50% score in their previous academic records.
  5. FD Requirements: Students should provide an FD according to the loan amount.
  6. University: The university that you are going to should come under the designated list of universities of your lender.
  7. Age: Students aged between 16 to 35 can apply for an education loan with collateral from most banks. However, private lenders typically don’t accept co-applicants aged more than 60 years or nearing their retirement age.

Documents Required for an Education against FDs

The following documents of the student and their co-applicants are required by banks for an education loan against FDs:

  1. KYC Documents: 
    Documents proving the identity and address of the student and their co-applicant. They can include:
    • A photo ID proof(Aadhaar card, Voter Id, Driving license, etc.), 
    • PAN card, and 
    • Passport.
  2. Admission Letter:
    Students should submit an admission letter from the university proving their acceptance into the university. 
  3. Previous Academic Records:
    Students should provide their previous academic records, such as the 10th,12th, and undergraduate marksheets.
  4. FD Documents: 
    Applicants should submit all the FD documents specified by their lender. 
  5. Financial Documents of the Co-applicant:
    Documents that prove the financial condition and creditworthiness of the co-applicant are required. These documents can vary depending on whether the co-applicant is salaried or self-employed.
  6. Additional documents:
    Lenders can also require other documents such as:
    • Passport-size photos of the applicant and the co-applicant
    • Applicable test score results, such as CAT, IELTS, TOEFL, and GRE.

How to Apply for an Education against FDs Through WeMakeScholars?

Applying for an education loan against FDs is quite simple when you go through WeMakeScholars. When you apply for an education through us, our dedicated financial officers carefully analyse your profile and connect you with the best banks according to your profile.

Since WeMakeScholars is funded and supported by the Ministry of IT, Government of India, we offer our services completely free of cost to students. The following is the step-by-step process of applying for an education loan against FDs via WeMakeScholars.

Step 1: Simply visit our website and fill out the education loan eligibility form or request a callback. Soon, a dedicated financial officer will get in touch with you and guide you throughout the entire loan process.

Step 2: The financial officer will ask for some of your details to check your eligibility. Provide all the details required by your financial officer. 

Step 3: The financial officer will analyze your profile and connect you with the most suitable lender according to your profile, and send you a document checklist.

Step 4: Submit all the required documents according to your financial officer. The financial officer will take care of the rest of the loan process and will update you on your loan status.

Conclusion

Education loans against FDs are a great financial tool that helps students afford higher education. It is a type of secured loan that requires students to pledge an FD as collateral for the education loan. However, many students are unaware of the banks offering such loans. Many public and private banks in India, such as SBI, KVB, and ICICI Bank, accept an FD as collateral for education loans. Applying for this loan can be quite challenging due to the varying terms and conditions of these banks.

To get a stress-free student loan process, request a callback today. Our team will carefully evaluate your profile to help you find the best loan according to your eligibility and manage the entire loan process so that you can have a smooth education loan journey.