How to Get an Education Loan When Collateral Is Located Elsewhere?

In India, many students who wish to study abroad often consider funding their higher education with the help of abroad education loans.

If you look online, you'll find out that a collateral education loan is better than an education loan without collateral. This is because the education loan schemes of the numerous government banks that provide collateral education loans offer various benefits to students. You can also go to our detailed article on the differences between secured and unsecured education loans.

This is why over 90% of education loans were provided by public-sector banks in 2019 as per the RBI.

Now for a secured education loan, you are required to pledge collateral securities (Immovable and Liquid securities) to get a loan against it. Out of the two types of collateral security, immovable property is the more commonly pledged type of asset as collateral security for education loans.

But, what if your immovable collateral is located somewhere other than where you currently stay? Can you still get an education loan on such property? 

Yes, you can pledge such collateral as security (provided it is acceptable). These cases are called Multi-city cases and are generally accepted by banks.

As mentioned, immovable properties (Houses, Flats, Non-agricultural land) are the most commonly pledged assets in the process of education loans. Many students still get stuck in various stages of their education loan process despite pledging assets that banks generally accept.

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 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 segregation of the property.
2. If the property is part of a bigger plot that 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.
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.

These rules and regulations are applicable whether the applicant asking for a collateral education loan and the property they intend to pledge to the bank is situated in the same region or in a different region.

Now that you have acquainted yourself with the different categories of immovable properties that can be pledged for a government student loan, let us move on to the subject of this article – The location of the property being pledged as security for a collateral education loan.

Since individuals are allowed to pledge properties that are physically located in a city/state other than the one from which they have applied for an education loan, the question you may ask is how do banks do multicity cases?

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 center for this very reason. When they see that the property being pledged as collateral security is situated in a place that 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 centers. This step can be completed at the branch level itself. It 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 center.
2. If the property is located in a different city/state, the processing center/branch sends a request to the processing center/branch which is closest to that location.
3. The respective bank/processing center 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.

Although the above procedure sounds like a short affair, many government banks take longer than a month to sanction normal cases let alone multicity cases.

When it comes to pledging property, 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.

These Multi-city cases require bank branches to coordinate with each other. The processing center/branch sends a request to the processing center/branch nearest to the property's location (as already described above)

Despite multicity cases being totally possible, 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.

WeMakeScholars have handled multiple Multi-city cases and have successfully been able to get loans sanctioned for students who had previously been denied by banks.

This was made possible because the financial team of WeMakeScholars is well-versed in the entire process and document requirements of various government banks for different regions.

Since your financial officer will be well aware of the complications that are likely to arise in a multi-city case, they make sure that all the legal formalities related to the collateral (legal and valuation) are completed within a stipulated time frame by effectively coordinating with both branches.

So if you are skeptical about whether your property can be considered as collateral for an abroad education loan or not, do not hesitate to get in touch with our team for assistance. You can request a callback, and since we are supported by the IT ministry, Government of India, we do not charge anything from the students