Types of Properties Acceptable As Collateral Security in Banks
Higher education funding is a matter of concern for most Indian students who wish to study abroad. The purpose of an education loan is to ease this concern and provide the required aid, without the students having to worry about their finances during the course of their studies abroad. An education loan against property borrowed from any of the government banks in India is considered to be one of the best sources of financial aid. However, many students who apply for government bank education loans often find it difficult to get their education loan in time due to two factors; slow processing time of a loan against property, and insufficient knowledge about the collateral security that can be pledged. The various examples of collateral for a secured loan are explained well in the 12th episode of Loanflix Inshorts, which has been embedded below.
Immovable property is one of the most commonly pledged forms of collateral security in the education loan process. This is primarily because a lot of borrowers of secured loans from government banks have very limited access to information regarding the types of collateral security that can be pledged for secured loans from different government banks. In the process of getting a collateral loan for higher education funding, borrowers often oversee the importance of having sufficient knowledge regarding collateral security that can be pledged with their lending banks. As a result, they tend to experience severe delays in getting secured education loans sanctioned by their respective lending banks at the right time.
What is Collateral Security? What is its Importance in The Government Bank Education Loan Process?
In banking terms, a collateral security refers to an asset(s) which is pledged with lenders by the borrowers for the purpose of obtaining a loan. An education loan which is provided on the basis of collateral security is called a secured education loan. Most government banks in India calculate the final secured education loan amount after considering the value of collateral security pledged by borrowers. From these details, it may be concluded that collateral security forms the very basis of any government bank education loan process.
What Are The Different Types of Collateral Security?
In India, all government banks accept two major forms of collateral security; immovable property and liquid security. An immovable property may refer to assets such as a house, flat, land, a plot, etc. Other than that,
borrowers are also allowed to pledge liquid security such as a fixed deposit, a life insurance policy purchased from any approved government provider, government bonds, etc. One important point which all borrowers must bear in mind is the fact that the value of the collateral security being pledged for a collateral loan must cover the value of the required education loan amount.
Out of the two major types of collateral security which are mentioned above, Immovable property is the more commonly pledged type of asset in the secured education loan process. Despite so much information being available on the internet regarding the collateral loan process, many borrowers still find it difficult to get their secured education loan on time. One very common reason for such delays is the fact that borrowers are unaware of the type of properties which are acceptable to banks as collateral security. So, let us take a look at the various types of immovable properties that can be pledged with government banks for collateral education loan.
Types of Immovable Properties That Can Be Pledged With Government Banks
It is common knowledge that immovable property is a widely accepted category of collateral security in government banks, all over India. However, borrowers cannot just pledge any property for their education loans. The banks have set certain mandates regarding what types of immovable properties are acceptable. Here are some examples of collateral properties which are accepted in government banks.
- House: residential properties are accepted everywhere.
- Open lands: It is important to note that the land must have a clear demarcation to define the boundaries. Also, agricultural lands are not acceptable as collateral security for secured education loans, under any circumstances.
- Commercial properties, like shops, industrial lands etc. These properties are only acceptable if no residential property falls within the area.
This is just a general list of immovable properties which are recommended for collateral security. The government bank branches located in various parts of the country have laid down various mandates for different types of immovable properties. In order to know the exact specifications laid by your lender, get in touch with the financial team of WeMakeScholars.
Another important aspect of the secured education loan process which can be helpful to borrowers is knowing the different property-related documents which students have to submit, in order to have a hassle-free education loan process. The property documents required by government banks for a loan against property differ, depending on the location in which they are located. The entire list of property documents and the basis on which they are bifurcated has been explained in detail in episode 4 of the Loanflix web-series. So ensure that you watch it as well. In order to get a detailed analysis of the education loan documents which are applicable to your property, do get in touch with the WeMakeScholars team.
How To Successfully Apply For A Secured Education Loan Through WeMakeScholars?
The financial team of WeMakeScholars is well-versed with the document requirements of various different government banks. The assigned financial officers are dedicated to making a student’s education loan process easy and hassle free from the very first day. If our students happen to encounter any problem in their education loan process,be it regarding their documentation or pre-visa disbursement, their respective financial officer ensures that the problem is fixed before the day ends. If you are still searching for the perfect lender to borrow your education loan from, register for a callback with our team today and we will help you out!
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.