Higher Education Loan Process: What to do if Collateral is Located Elsewhere

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20200617_200320_0000 (1)In India, many students who wish to study abroad often consider funding their higher education with the help of education loans. A higher education loan from any of the government banks in India is considered by many of them to be one of the most reliable sources of overseas education funding. It is because the education loan schemes of the numerous government banks offer various benefits to its borrowers. 

 This is why a government bank education loan is one of the most sought after sources of higher education funding by students. As easy as it may seem, most of the government bank education loan applicants find it difficult to get their higher education loan sanctioned by the respective banks on time. A discrepancy in the particulars of the pledged collateral is one of the principal reasons behind such delays. This article aims to address one of them – what to do if your property is located in a different state/city than the one in which you applied for a higher education loan? Before we dive right into the subject, let us take a look at the different categories of higher education loans in India.

 Higher education loans are categorised into two different types based on the requirement of collateral. In order to borrow an education loan in India, it is essential to have sufficient information on both types of education loan for abroad studies.

Secured Education Loan: Secured education loans are lent on the basis of collateral. The typical process of getting a collateral-based higher education loan in India involves the pledging of collateral security. These loans are lent by all prominent government banks in India. One of the biggest benefits of secured education loans borrowed from government banks is the moratorium period which is a loan holiday granted to all candidates before the repayment period begins. This moratorium period buys enough time for other students to find employment and begin the repayment of their education loan for abroad studies. 

 Unsecured Education Loan: Unsecured education loa is basically an education loan without collateral. These loans do not require any form of collateral. They are mainly lent by private financial companies called NBFCs (Non-Banking Finance Companies) and a few other private banks. Government banks lend unsecured education loans of up to Rs.7.5 Lakhs too. Unlike government banks, NBFCs and private banks do not offer the benefits of a moratorium period to the loan applicants.

 The entire process of getting a higher education loan belonging to both the categories has been described in great detail in previous blogs as well as Loanflix episodes. The WeMakeScholars team believes that no student who is in need of an education loan should be denied or unable to borrow one under any circumstances. To know more about how we help students with their higher education loan process, do reach out to our financial officers by requesting a callback.

 

Higher Education Loan: Types of Collateral Accepted by Government Banks

 Immovable Property: An immovable property is one of the most frequently pledged categories of assets as collateral against a higher education loan. This category involves assets like a house, a residential flat, a plot with defined boundaries, an independent house, a non-agricultural land, etc. The value of the property must exceed the total education loan amount required by candidates. This is a mandatory requirement which all applicants of an abroad study loan have to fulfill in order to get a government bank education loan to fund their expenses.

 Liquid Security: Did you know that government banks do accept liquid assets as collateral against higher education loans? Assets such as fixed deposits, government bonds, life insurance policies from government-approved lenders, etc. are accepted by government banks as collateral security.

 A Third-Party’s Assets: 

All government banks allow students to pledge a third-party’s assets as collateral security under the following conditions. This provision is only applicable to students who borrow government bank education loans.

  1. Loan applicants who are unable to pledge their own assets as collateral. 
  2. If the market value of the asset being pledged does not cover the required education loan amount. 

 This third-party essentially refers to individuals who are not part of the candidate’s immediate family. For e.g., uncle, aunt, friends of the candidate or the primary co-applicant, etc.

The above categories have specified some of the basic types of assets which are accepted by different government banks as collateral security for an abroad study education loan. Let us move on to understand some of the more specific rules regarding the same.

 abroad education loan

Different Categories of Immovable Properties That Can be Pledged as Collateral

As mentioned in the previous section, immovable property is one of the most commonly pledged assets in the education loan process. Many students still get stuck in various stages of the collateral education loan process despite pledging assets which meet the lending bank’s requirements. A major reason for this is that many of them are unaware of the legal restrictions of the immovable property owned by their co-applicants. Property owners are required to abide by the following regulations in order to get a study abroad education loan.

  1. If the property was co-owned before and has been divided amongst two people of the same family, then it has to have clear, defined boundaries separating both sides.
  2. If the property in question is part of a bigger plot which was later divided into different sections, then loan applicants will be required to submit the registration documents of the bigger plot or the motherland, as is known in bank terms. 
  3. If the property being pledged as collateral was gifted to the candidate or their co-applicants, then the gift deed of the property has to be submitted Gift deed and Will should have been registered and now the property should be registered on a new owners name. 
  4. If the value of the study abroad education loan or that of the property being pledged as collateral exceeds INR 1 Cr., then the bank will require two legal and two valuation reports.

Now that you have acquainted yourself with the different categories of immovable properties that can be pledged for a government student loan, let us come to the talking point of this article – Location of the property being pledged as security for a collateral education loan.

What Steps Should Be Taken if the Property in Question is Located Elsewhere?

The previous paragraphs tell you all about how tangible security is one of the top choices of students when it comes to pledging collateral for a higher studies education loan. All of the above rules and regulations are applicable only if the candidate who is applying for a collateral education loan and the property which they plan on pledging to the bank are located in the same place. So does it imply that individuals whose properties lie in a different location from that of their residence are not allowed to apply for higher education loans? Such a higher education loan process is also referred to as a multi-city case by banks.

Individuals are allowed to pledge properties which are physically located in a city/state other than the one from which they have applied for an education loan. When candidates apply for a government bank education loan, the very first step taken by the respective banks on receiving the education loan application is to verify the property documents.

Government banks have a processing centre for this very reason. When they see that the property being pledged as collateral security is located in a place which is different from the location of their application, public/government banks take the following steps.

  1.   Once the student submits an application, branches send the property documents for verification at their respective processing centres. This step can be completed at the branch level itself. This step varies from one bank to another. Some banks conduct the primary verification of documents at the branch level, instead of sending the same to a processing centre.
  2.   If the property is located in a different city/state, the processing centre/branch sends a request to the processing centre/branch which is closest to that location.
  3.   The respective bank/processing centre appoints a lawyer and valuator to generate a legal and financial report of the property. Once this step is successfully completed, the corresponding reports are sent to the branch where the student had applied for a higher education loan and the remaining steps in the abroad education loan process are carried out as usual.

abroad education loan

Hurdles Faced By Students in a Multi-city/state Higher Education Loan Process

Although the above procedure sounds like a short affair, many government banks take longer than a month to fulfil the above formality. When it comes to pledging property as collateral security, especially one which is located in another city/state, it is important to ensure that it meets all the rules and regulations imposed by the local authorities. If the lending bank comes across any discrepancies in the same, loan applicants will be required to re-apply for missing documents or permits related to the property in question and again restart the entire process. 

Apart from that, individuals whose properties are located in a different place than their place of residence can obtain a study abroad education loan by pledging the same as collateral with government banks. There is no rule which states otherwise. Despite this, many government bank officials straightaway reject such applications to avoid the hassle of having to request another branch for legal verification reports of such properties. 

This is when the expertise and assistance of the financial team of WeMakeScholars come into the picture. Our financial officers are well-aware of the complications that are likely to arise if students are to pledge properties located in a different city/state other than the one from which they had applied for a higher education loan, and assists our students in getting their government student loan on time according to the same. 

WeMakeScholars intervenes here and ensures that all the legal formalities related to the collateral being pledged are completed within a stipulated time frame, thus enabling students to get their abroad education loan sanctioned exactly at the moment when they need their funds. So if you are sceptical about whether your property can be considered as collateral for an abroad education loan, do not hesitate to get in touch with our team for assistance. You can request a callback here.

Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s at free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others

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Bibliophile, wanderer, major foodie. I write too :)

 

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