Though there are benefits to taking out an Education loan with collateral in India for study abroad, you should first learn about study loans for overseas study, your options, and the people who can assist you with paperwork and processing before considering applying. First off, you will get a thorough understanding of all the information regarding student loans that you require from this blog.
According to a prominent Indian news outlet, a consulting firm’s report suggests that by 2024, there could be 1.8 million Indian students aiming to study overseas. Furthermore, 42% of students planning to study abroad are considering studying in non-English speaking countries like Norway, Italy, Japan, France, Sweden, etc. Additionally, it has been noted that lenders that focus on students provide simple payment plans, 100% financing, and other benefits, enabling students to pursue their higher education without concern for money.
Education loan with collateral are made to help students pay for their study abroad. Secured loans require borrowers to pledge assets as collateral, such as real estate, fixed deposits, or other valuable assets, in contrast to unsecured loans, which are not backed by collateral. Because of the sense of security this collateral gives lenders, they can lower the risk of the loan and give borrowers better terms.
Key benefits of Education loan with Collateral
- Lower Interest Rates: One of the primary advantages of secured abroad education loans is the comparatively lower interest rates. Since these loans are secured by collateral, lenders are more willing to provide funds at reduced interest rates, making education financing more affordable for students and their families.
- Higher Loan Amounts: The presence of collateral allows borrowers to access higher loan amounts compared to unsecured loans. This is especially beneficial for students pursuing courses in countries with high tuition fees and living costs.
- Flexible Repayment Terms: Secured loans often come with flexible repayment terms, allowing borrowers to tailor the repayment schedule according to their financial capabilities. This flexibility is crucial as it accommodates the uncertainties and challenges students may face during and after their education.
- Improved Approval Chances: The presence of collateral enhances the chances of loan approval. For students who may not have a robust credit history or a stable source of income, securing a loan with collateral provides a viable path to funding their education.
In light of the growing competition, it is essential to gather all pertinent information on Education loan with Collateral for overseas studies in order to be able to make an informed and responsible choice. Even though some of the financial jargon may be confusing, doing so will enable you to choose the best education loan for your needs.
Two primary types of education loan with collateral:
- Education loan with collateral
- Education loan without collateral
What is an education loan with collateral?The asset or property that a borrower pledges to a lender as a type of guarantee for an education loan is known as collateral security. It lessens the risk involved in lending a substantial amount of money and gives the lender a sense of security. The lender has the right to take possession of and sell the collateral in order to recoup the unpaid balance in the case of a loan default.
Types of collateral are accepted by the lenders for education loan with collateralIn general, lenders will accept one of three forms of collateral for an education loan with collateral:
- Tangible assets: Lenders will take any immovable property with a clearly defined boundary, including any non-agricultural land with an independent home, flat or plot.
- Assets classified as intangibles include government bonds, life insurance policies, and fixed deposits. Since these assets can be instantly turned into cash, they are taken at their exact value. A few things that borrowers need to remember are that FD should be made with the same banks that provide the loan.
- Collateral from third parties: Although the borrower does not own any collateral, they may pledge collateral from friends or family.
Required amount of collateral for a student loan?The amount of collateral needed varies from lender to lender and from scheme to scheme, so there is no one-size-fits-all answer.
According to government guidelines for property appraisal, the collateral value, which is assessed by licensed property evaluators, is typically less than market value. Public sector banks like SBI typically reimburse up to 90% of educational costs. Students are required to arrange the remaining 10%. One notable exception to this rule is the Bank of Baroda, which is able to pay for a small number of carefully chosen colleges in full. On the other hand, another drawback is that Axis Bank, a private bank, typically only pays for 85% of all costs.
Characteristics of an education loan with collateral
- An education loan with collateral requires some sort of security, either tangible or intangible.
- Higher loan amounts, up to INR 1.5 Cr, are available with secured education loans at lower interest rates (beginning at 8.85%).
- Generally speaking, loans with collateral have lower interest rates than those without.
- To estimate EMIs and total interest, use GyanDhan’s education loan interest and EMI calculator.
- While it’s not necessary to provide proof of parental income, having a high income can be advantageous.
- Collateralized education loans come with longer repayment terms.
- Certain banks, such as SBI and BoB, do not provide repayment during the study period; instead, interest is accumulated.
- Bank secured loans may be eligible for Section 80E tax benefits.
Education loan with collateral serve as a gateway for students to turn their international education dreams into reality. While the collateral requirement may seem like a significant commitment, the benefits, including lower interest rates and higher loan amounts, make these loans an attractive option for many aspiring students. By understanding the steps involved in securing such a loan and being diligent in the application process, students can pave the way for a smooth and financially viable educational journey abroad. Remember, Education loan with collateral is an investment in oneself, and a secured abroad education loan can be the key to unlocking a world of opportunities.