Types of Collateral For SBI Education Loan
An SBI education loan is the first option considered by most candidates who wish to fund their higher education abroad and their co-applicants. It is common knowledge that in order to borrow an SBI education loan, candidates are required to pledge some kind of collateral. However, a lot of them are unaware of the different types of collateral accepted by the bank for collateral education loans which fall under the SBI student loan scheme as well as the SBI Global Ed-Vantage scheme. This article will tell you about the different types of collateral which can be pledged for a government bank education loan, especially SBI education loans.
Before we begin exploring the different types of collateral security acceptable for a typical government bank education loan like the ones offered by SBI education loan schemes, let us understand the two major SBI education loan schemes in brief.
SBI Education Loan For Abroad Studies: The SBI Global Ed-Vantage Scheme
The SBI Global Ed-Vantage Scheme is a collateral education loan scheme that has been exclusively put together for students who wish to pursue their higher education in notable, prestigious universities in countries like the USA, Canada, Germany, etc. This SBI education loan is granted especially to students who have secured admission for professional degrees like Masters, PhD & M.Phil courses in universities and colleges abroad.
Generally, students who need collateral education loans of above INR 20 Lakhs only are granted an SBI education loan under this scheme. As is the case with most government bank education loans, the eligibility criteria to get an education loan under the SBI Global Ed-Vantage scheme are very less. However, it is important to fulfil them all in order to have a hassle-free process of education loan in SBI.
Applying for an education loan under the Global Ed-Vantage scheme has now become easier thanks to the SBI Digital team. When you apply for an abroad education loan through this team, the entire process is done in a systematic and time-efficient manner and hence, the loan sanction process is done way earlier than is expected of a typical government student loan process. With the help of the SBI Digital Team, it is now possible for students to apply for an education loan for Bachelor’s degree programs in prominent universities abroad.
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SBI Education Loan For Abroad Studies: The SBI Student Loan Scheme
The SBI Student Loan Scheme is specifically designed for students who are in need of education loans of up to INR 20 Lakhs to fund their higher studies abroad. The terms and conditions of this education loan scheme are slightly different than the Global Ed-Vantage education loan scheme. The eligibility criteria for the SBI Student Loan Scheme are similar to that of the Global Ed-Vantage scheme. However, certain terms like the loan margin, collateral margin, etc. different.
In order to know further about the difference between both the SBI education loan schemes, do get in touch with the SBI Digital Team. This team is the official national digital partner of SBI for the purpose of processing abroad education loans.
Types of Collateral Security To be Pledged for an SBI Education Loan
A lot of students who wish to study abroad with the help of an SBI education loan are not very well aware of the types of collateral security that are majorly accepted by the bank for both the SBI education loan schemes. The types of collateral listed in this article are acceptable not only by the SBI, but also by almost all major government banks which offer an abroad education loan. In any secured education loan process, it is essential to get a rough idea about the three major types of collateral which are accepted by all banks for an abroad education loan.
Immovable Property: An immovable property is one of the most frequently pledged category of assets as collateral against an abroad 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. come under this category. The value of the property must exceed the total education loan amount required by candidates. This is a mandatory requirement and all candidates are required to meet this in order to get an SBI education loan.
Liquid Security: Did you know that government banks do accept liquid assets as collateral against an abroad education loan? Assets such as Fixed Deposits, government bonds, life insurance policies from government-approved lenders, etc. are accepted by government banks like the SBI, BoB, etc. as collateral security.
Third-Party’s Assets: This provision is only applicable to government banks, especially SBI and Bank of Baroda. In case if a candidate does not possess any of the above assets or if their values do not cover the required education loan amount, then they can pledge a third party’s assets as collateral security against government student loans. 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.
Now that you have a sufficient understanding of the three major types of collateral which are accepted for an SBI education loan, let us take a look at the legal acceptability of these categories of assets as education loan collateral by the SBI.
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Types of Security For Student Loans: Immovable Property
As mentioned in the previous section, immovable property is one of the most commonly pledged assets in the education loan process. Despite possessing an immovable property whose value meets the requirements prescribed by the SBI, a lot of candidates are still not able to get an abroad education loan easily. 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.
Before agreeing to grant an abroad education loan against immovable property, many government banks, including the SBI, give due consideration to certain factors of the asset which has been pledged as collateral security.
- 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.
- 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.
- 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 New owners name.
- If the value of the 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.
Types of Immovable Properties That Are Not Accepted For an SBI Education Loan
Having a thorough knowledge about the different categories of immovable properties which are unacceptable will be more helpful to students who seek an SBI education loan to fund their higher studies abroad. Before we list out the different criteria that your immovable property needs to fulfil to get an SBI education loan, here is a list of properties which are not accepted in an SBI education loan process under any conditions.
- Agricultural lands are NOT acceptable, even if someone has built a house on it, it is still not acceptable. If that area is converted to residential, then get a “conversion document”.
- Gram panchayat properties are NOT usually acceptable. Property has to be under Municipal Corporation. According to SBI circular, Gram Panchayat property is not accepted. But what we have observed is, it’s acceptable in Kerala always, and sometimes in other regions. So, ask the student to first fill the SBI form, and after that to go ask the Branch Manager . If he accepts that collateral, that’s cool, or else NBFCs is the only option.
- Cantonment Area property is NOT acceptable
Types of Immovable Properties Accepted by SBI and Other Government Banks
- The bank prefers immovable properties located in urban cities as opposed to those located in rural areas.
- Residential properties are given greater preference as opposed to commercial properties. It is recommended that you pledge commercial property as collateral only if you do not possess a residential property.
- Empty lands are often less preferred by most SBI bank branches. Properties which have a building/house on them are often accepted by SBI for abroad education loans.
- If you plan on pledging an empty plot as collateral, candidates need to bear in mind that plots whose boundaries are clearly defined are given preference over those which do not have one.
As mentioned in the above paragraph, SBI mostly prefers properties which are located in urban cities as opposed to those located in rural areas. However, even within the cities, SBI only accepts properties which fulfil certain criteria. If you reside in any of the cities mentioned below, then the following criteria can be applied to the properties which you plan to pledge as collateral.
Types of Urban Immovable Properties Accepted In the SBI Education Loan Process
For Immovable Properties in Bangaluru/Bangalore:
In 2007 all immovable properties within Bangalore were divided into different categories or ‘Khatas’. These Khatas are divided into three different categories:
- A Khata properties: Immovable properties belonging to the ‘A’ Khata are majorly accepted by all SBI Bank branches in Bangalore as collateral for an abroad education loan under both the schemes.
- B Khata properties: Properties under this Khata have a conflicting legal status and are hence these properties may or may not be accepted by SBI for an abroad education loan. It is possible for B Khata property owners to upgrade their property to an A Khata by paying ‘betterment charges.
- C Khata properties: These properties are either unregistered properties or illegally constructed properties. Properties that come under this category are not accepted as collateral for any loan.
For Immovable Properties in Mumbai
- Education loans are not possible for Chawl properties.
- Properties under pagdi system are not acceptable.
- SRA Properties (given by govt to Slum people for Rehabilitation) are NOT acceptable.
- Many flats in Mumbai do not have OC Certificate, Such properties will not be accepted by Govt banks. Very rarely we can try if alternate documents like certificate of possession and property tax. NBFCs can accept it.
For Immovable Properties in Telangana
- In Telangana, there is an additional document required which is – LRS (Land regularization scheme) it is required for open plots and BRS (Building regularization scheme) is required for built-up properties. Most of the students do not have this document as it came into the picture only a few years ago. LRS alternate is Land Use certificate which we can get easily.
- Notary registered properties are not acceptable. This is not considered as proper registration of property.
For Immovable Properties in Delhi
- Noida, Gurgaon- Properties which are on Lease or GPA or Power of attorney cannot be considered for an education loan in SBI.
- Conveyance deed is required for DDA flats- Conveyance deed is the conveyance of right of ownership of the flat to the allottee, after the payment and the documents are received from the allottee and possession is taken over by him/her. Conveyance Deed is executed in the cases of freehold allotments only.
For Immovable Properties in Kerala: Wetland or Nilam land is not acceptable for a loan.
In the current times, with the rising amount of students who have been applying for an education loan in SBI, it is extremely essential to be well aware of the different types of collateral that are accepted by the bank. For any further doubts about the types of collateral security which are accepted for an education loan in SBI, do get in touch with the SBI Digital Team.
Types of Security For Student Loans: Liquid Security
Unlike immovable properties, SBI has set relatively easier criteria for liquid security which is being pledged as collateral against an SBI education loan. The following Liquid assets which fulfil the following criteria can be accepted as collateral against an SBI education loan.
Type of Acceptable Liquid Assets
Value considered by SBI for Education Loans
Own bank deposit (TDR/STDR/RD)
For TDR – Face Value will be considered
For STDR/RD – Face value + Accrued interest
Insurance Policy (From SBI Life/LIC)
The surrender value of the insurance policy
Govt Securities /Bond issued by PSUs
Face value or Issue price, whichever is lower
Mutual fund schemes of SBI Mutual Funds (FMP/DAF)
Loan margin will be calculated on a case by case basis
Collateral Belonging to a Third Party
Candidates may pledge both immovable properties as well as liquid assets belonging to a third party as collateral security against an SBI education loan. However, it is important to understand that SBI education loan taken against third-party collateral and loans against FD which is less than 6 months old are not accepted as funding proof by the embassies of Australia and New Zealand.
The process of getting a government bank education loan in India is considered by many students to be a painful affair because very few candidates have a good knowledge of some of the basic education loan concepts. In order to know more about the different factors of an easy education loan process, do get in touch with WeMakeScholars. Our financial officers have been able to help out close to 3000 students with their abroad education loans despite the complicated status of their profile. Do register a callback or write to us regarding your education loan issues and our team will definitely help you with the end to end process within a short period of time.
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 is 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