Collateral Education Loan
If you are a recent graduate and would like to pursue higher education abroad, you must be surely thinking about an education loan to cover the expenses related to your abroad education. At the time of your inquiry, you will encounter terms like secured or collateral education loan and if you are unclear about it, then this article is just for you.
Collateral Education Loan
Collateral Education loan is a loan where you are required to guarantee a property or any other eligible financial assets to take the loan against. A detailed video on Collateral Education loan has been uploaded as episode #2 in our weekly YouTube web-series “Loanflix- Education loan Simplified” where we provide students with crucial information regarding Abroad Education loan.
Banks that offer Collateral Education Loan
Collateral Education Loan is usually provided by the Government banks like SBI, Bank of Baroda etc.
NBFCs can also be referred for a collateral education loan only if there is an excess of prior cases at the banks which is not that often.
How much Collateral Education Loan can be obtained?
The amount of Collateral education loan you could get is in the range of Rs. 10 lakhs to Rs. 1.5 crores. The interest rate on Collateral Education loan is usually between 9.55% to 10.80%.
Types of Collaterals
There are three types of Collateral that the bank accepts for the abroad education loan.
- Immovable Property: The independent house, flat or land are accepted as security by the Bank. Non-agricultural open land with clear defined boundary lines is also accepted as collateral.
Agricultural Lands are not accepted as Collateral.
Relevant property documents are required along with its layout and other city-specific documents if applicable.
The immovable property has a collateral margin which means the loan amount is not equal to the value of the property.
- Liquid Securities: Liquid Securities are collaterals that can be converted to cash instantly like Fixed Deposits (FDs), Life Insurance Policies (LICs) or Government Bonds and hence has no collateral margin.
The loan can be taken on the existing FD or a new FD can be taken. The only condition is that FD must be with the bank you are taking the loan from. The Holder of the FD will receive interest rate on it same as before.
LIC can be taken as a liquid asset required that its a maturing policy with a fixed maturity date.
- Third party Collateral Education loan: In this case, collateral placed can be anyone’s property (Family, Friends etc.). Most of the bank officials may deny it as they may not be aware of it but financial officers at the WeMakeScholars can help you with it by speaking on your behalf.
Why begin education loan process early?
It is preferable to commence your loan process before you receive an admit because
- The legal report and property valuation can be done beforehand and it would clarify the chances of you getting a loan much earlier in the process. The legal report or valuation report has a validity period between three months to three years.
- There would also be plenty of time to arrange any land or other property documents that the bank requires. This increases the chances of getting your loan sanctioned well before the visa interview date.