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Looking for education loans with collateral? GyanDhan brings a complete guide on collateral based education loans to study abroad, with eligibility, benefits, best lenders for collateral loans, tips & more.
Pursuing higher education abroad can be a life-changing experience, but it often comes with a significant financial burden. To bridge the gap between your aspirations and your financial capabilities, education loans can be a viable option. When seeking substantial loan amounts or favorable terms, offering collateral as security can be a smart choice.
Before moving further let’s briefly understand the types of education loans available. There are broadly two types of education loans as follows:
Collateral security refers to the asset or property that a borrower pledges to a lender as a form of guarantee for an education loan. It provides the lender with a sense of security and reduces the risk associated with lending a large sum of money. In the event of loan default, the lender has the right to seize and sell the collateral to recover the outstanding balance.
Check Your Education Loan Eligibility
There are broadly three types of collateral accepted by the lenders in a secured education loan -
Know more about: Types of collateral accepted by public and private banks as security
There is no definitive answer for it as the amount of collateral required differs from lender to lender and from scheme to scheme.
Below mentioned is a brief comparison of a few leading lenders to help you estimate:
E.g., if the property value is estimated to be INR 1 Cr the loan amount sanctioned by SBI would be INR 70 Lakh whereas the Bank of Baroda would sanction INR 1 Cr. Whereas, a private bank like Axis Bank, sanctions 65-70% of the collateral value as the loan amount.
The education loan eligibility varies from lender to lender. The eligibility requirements are stricter for nationalized banks as compared to NBFCs as they offer loans at much less interest. You can check your loan eligibility at GyanDhan for free, to know how much loan amount you can acquire as per your profile.
Let us take a look at some common eligibility criteria for applying for an education loan with collateral.
Taking a secured abroad education loan, where you provide collateral as security, can offer several perks compared to an unsecured loan. Here are some advantages:
It's important to consider that the collateral you provide is at risk if you're unable to repay the loan. Defaulting on a secured loan can result in the lender seizing and selling the collateral to recover the outstanding balance. Therefore, it's crucial to assess your ability to repay the loan and choose collateral that you can comfortably provide without jeopardizing your financial well-being.
Tips while applying for a collateral based education loan
Collateral security for education loans can offer numerous benefits, including access to higher loan amounts, lower interest rates, extended repayment tenures, increased chances of loan approval, and potential credit-building opportunities. However, it's important to carefully assess your financial situation, consider the value of the collateral, and review the terms and conditions of the loan before proceeding.
Comparing loan products and lenders can be difficult and confusing. If you too are in a dilemma, you can request a call back to know your best options after a proper evaluation of your profile and loan eligibility. By doing so, you can make an informed decision that supports your educational aspirations while safeguarding your financial well-being.
Calculate your Education Loan EMI
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Various assets can be used as collateral, including real estate properties (such as residential properties), and financial investments (stocks, bonds, mutual funds).
The value of the collateral is typically determined through property valuation by experts appointed by the lender. They assess factors such as market value, condition, and authenticity (in the case of valuable possessions).
It depends on the lender's policies. Some lenders may accept jointly owned collateral, while others may require the consent and involvement of all owners. If the collateral is already mortgaged, the remaining equity may be considered.
If you default on the loan, the lender has the right to seize and sell the collateral to recover the outstanding balance. It's essential to make timely repayments to avoid losing your collateral.
Offering collateral involves the risk of losing the pledged asset if you fail to repay the loan. It's important to carefully consider your financial situation, repayment capacity, and the value of the collateral before committing to a collateral-backed loan.
No, collateral security is not mandatory for all education loans. Many lenders also offer unsecured education loans that do not require collateral. However, these loans may have higher interest rates and lower loan amounts compared to secured loans.
Check Your Education Loan Eligibility
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