Education Loan against Property

The trend among Indian students to study abroad has been on the rise for the past few years as it allows students to study in top universities with world-class faculties, better career opportunities, and a promise of a bright future.

But studying abroad is not cheap, it requires huge funds to finance an education abroad. Every year there is a rise in tuition fees and living expenses also. According to a report by CNBC, “There is a rise in college tuition fees averaging 2% every year amidst inflation. The numbers were higher before.”

The most common way to fund your education abroad is by taking an education loan. Education loans are primarily divided into 2 types, Secured and Unsecured. Among the 2 types of education loans, a Secured education loan is preferred by students due to low-interest rates and a longer repayment period offered by them.

There is a common myth that the only option to take a secured education loan is to put the house as security, which is not true. There are many other properties (Liquid and Immovable) that can be pledged as collateral other than a house. 

In this article, we are going to cover everything you need to know about education loans against property in detail.

As we have mentioned above, many other forms of property can be used as collateral. When you have collateral that you can pledge, going with a public bank to process your education loan is the best option. Different Properties required for education loans that you could use as collateral are, 

• Immovable property like a House, Flat, and Non-Agricultural land. 
• Liquid security like Fixed deposits, Insurance policies (Term Insurance), and Govt bonds.

You can also get an education loan on the property of your relative or friend who is willing to pledge his/her property for your education loan. You can do so by adding them as a guarantor. You can do this in case your primary co-applicant does not own collateral. 

Among the immovable properties listed above, some types of properties are most and least favoured by the banks. Also, you can not use any property for an education loan. There are certain requirements created by banks.

Let’s have a look at the properties that are most preferred, least preferred, and not at all accepted by banks as collateral security.

That means you can not take an education loan against agricultural land, land approved by gram panchayat, or a house/flat in the cantonment area. If you have an empty land, then you can build a 2-foot boundary wall on that land to get a loan against it.

When applying for an education loan, knowing the city-specific security requirements may differ with the city or state you live in is important. In this section, we list the requirements that should be fulfilled to apply for an education loan with collateral in cities such as Mumbai, Delhi, Telangana, Kerala, and Bengaluru. Being aware of these requirements in your local area makes you prepare your property by the required standards thus reducing the time of loan sanctioning and disbursement. 

For Mumbai

• Chawl Properties are not accepted
• Properties under the Pagdi System are not accepted
• Properties without an Occupancy Certificate are not accepted

For Delhi

• Properties on leases are not accepted
• Lal Dora (Red Line) properties are not accepted
• A conveyance deed and DDA allotment letter are required for DDA flats

For Telangana 

• LRS (Land regularization scheme) is required for open plots
• BRS (Building regularization scheme ) is required for build-up properties
• Notary-registered properties are not accepted

For Kerala

• Wetland or Nilam land is not accepted
• Properties with rubber plantations are not accepted
• Pledged property should have proper road access (municipal road with a minimum width of 8 feet)

For Bengaluru

• A-Khata properties are accepted
• Public banks don't accept B Khata properties but provided DC conversion, some private banks may accept it.
• Learn how to convert B Khata property to A Khata property.

Getting an education/student loan on Property is easy if you have the documents mentioned below:

• Property Title Deed
• Registered Sale Agreement/ Gift Deed/ Will
• Original registration receipt for the above agreement
• Allotment letter by Municipal corporation
• Copy of municipality-approved building plan or plot layout
• Latest property tax bill and electricity bill bearing the same address
• 30-year link document or previous chain of sale deed establishing title or EC is required.
• For agricultural land, if that area has been converted into residential then a "conversion document" will be required.

Education loans against property can get you from 10 lakhs to 1.5 crores depending upon the property value and your total loan requirement. The interest rate on a collateral Education loan is usually between 8.5% to 10%. 

To know how immovable properties are valued by banks for collateral education loans, read our dedicated article on the same subject here- How are collaterals valued for an education loan?

The process starts with students visiting the bank’s branch with all the required documents. Then the bank will assign a lawyer and a valuer for your property for which students have to pay some 7K to 8K to banks as a fee to the lawyer and the valuer, this is not needed if the collateral is liquid security. After receiving the legal and valuation reports, they send these reports along with all the documents to the central processing cell that takes care of the loan process. 

Once the loan gets sanctioned, students get a sanction letter which stays valid for approx 6 months. Then students with their co-applicants have to submit all property originals to either CPC or the branch. The process involves stamp papers, affidavits, etc which will be charged at approx 0.5% of the loan amount, then the account is ready for the loan amount to be disbursed.

Getting an education loan on Property can be a laborious task but not necessarily if you go via WeMakeScholars. With a convenient process and lesser processing time, we can get your education loan done within 15-20 days.

Indeed the process involved in getting an education loan on the property takes weeks and sometimes more than a month an entire loan process but you can't deny the advantages with which it comes-

• A lower rate of interest helps you save lakhs in the long run 
• A minimal processing fee of just 10K plus GST, and for some public banks 10K is refundable.
• Larger loan amounts and a longer loan term compared to any other lenders
• Moratorium period / Grace period of course duration plus 6-12 months where simple interest is charged but You need not have to pay anything during your moratorium period although you can if you want to.
• Even after your moratorium period if you for some reason miss 2-3 months of EMI, public banks won't get bothered much

The biggest advantage of an education loan on the property is that you can opt for any course be it a bachelor's degree because not many lenders will give an unsecured loan for a bachelor's degree.

Public banks give the best deal in the market, it is just that they take a longer time to process your loan if you go on your own, but if you go through WeMakeScholars then we can speed up your loan process by coordinating directly with the loan processing dept. Even if you don't have any property to pledge, WeMakeScholars can help you in getting an unsecured loan as well. We try our best to get students the best deal they can get. So do reach out to our financial officers by requesting a callback. Our team of Financial officers assists you with the entire education loan process until sanction, disbursement, and beyond. All the services offered by WeMakeScholars are free of cost as this initiative is supported by the IT Ministry, Govt. of India.