Collateral for Education Loan: Everything You Need to Know
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Many people prefer education loans as a trustworthy and secure way to pay for their education since they offer a number of benefits to both students and their families. The process of education loans, too, has been simplified over the years. Education loans for abroad studies are now hassle-free and practical thanks to the online application, speedy processing, doorstep service, and comprehensive expert counselling.
A leading Indian news organization has mentioned a report by a consulting firm that states that by 2024 the number of students from India planning to pursue higher studies abroad may touch 1.8 million. Also, 42% of those who intend to study overseas are thinking of opting for non-English speaking nations such as Norway, Italy, Japan, France, Sweden, etc. It has also been observed that student-centric lenders offer easy payment options, 100% finance, and other advantages allowing students to continue with their higher education without worrying about their payments.
Check Out: Eligibility Criteria of Education Loan for Studying Abroad - Documents Required
Since numerous banks and financial organisations in India offer education loans to students, they are allowed to examine and contrast different packages before choosing one. Although the features and services offered by different banks vary, most offer the benefits listed below to students and their families:
- Simple online application
- Section 80E tax advantages
- Flexible payback arrangements
- Long-term moratorium
- No margin funding up to Rs. 4 lakh
To be able to make an educated and prudent decision, it is crucial to obtain all relevant information on education loans for abroad studies in light of the expanding competition. Although some of the financial jargon might be difficult to grasp, doing so can help you select an education loan that best meets your needs.
Education Loans can be classified into two main types:
- Unsecured Education Loans – Loans without collateral
- Secured Education Loans – Loans with collateral
Before you begin your loan application, you must understand the meaning of collateral, its need, the types of collateral a lender accepts and the difference between education loans with collateral and without. You can also contact India’s leading education loan providers through Shiksha Study Abroad.
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What is Collateral for Education Loan?
Students seeking educational loans frequently become perplexed when they hear the phrase "collateral education loan." It's because they are unsure of what it is or what kind of protection they can provide. Collateral is an asset pledged against your education loan. It can be a tangible asset like a house or an intangible asset like a Fixed Deposit.
Banks and financial institutions ask for collateral to mitigate the risk. If a student fails to make the repayment of the education loan, the collateral is used towards the payment of the same. For the most part, banks accept two categories of collateral as security for loans for international education. If you have a property to pledge, it is always preferable to obtain a collateral education loan from a government bank. Collateral security can be in the form of a house, flat, bungalow, non-agricultural land, fixed deposit, life insurance etc.
Difference Between Secured and Unsecured Loans
Education loans secured with collateral are known as secured loans. Many banks and non-banking financial institutions provide education loans without collateral which are known as unsecured loans. Since the risk factor associated with secured loans is lower, the interest rate of a secured loan may be lesser than an unsecured loan.
All banks and NBFCs require parents to be join-borrowers on an education loan. For loans up to Rs. 4 Lakh, an education loan without collateral and co-applicant is granted. For loans above Rs. 4 Lakh and less than Rs. 7.5 Lakh, security in the form of a third-party guarantee may be required. The third-party guarantee is an assurance that if the original borrower fails to repay the loan due to any reason, the third-party guarantor will be legally responsible for making the repayment of the education loan. The lender may choose to forego a third-party guarantee if the net worth/income of the parent (acting as joint borrower) is found satisfactory. Collateral of suitable value is required for all education loans exceeding Rs. 7.5 Lakh.
Different banks and NBFCs accept different kinds of collaterals. However, common assets that can be pledged against your education loan are –
- Tangible Assets – House, Apartment, Bungalow, Shop, Non-agricultural Land, Vehicle etc.
- Intangible Assets – Fixed Deposit, Life Insurance, Stocks etc.
The value of collateral for an education loan required by your bank or NBFC can be equal to, less than or greater than your loan amount. Every student has a different profile and set of requirements. Hence, the value of collateral depends on various factors which include –
- Academic history of the student – It may happen that a meritorious and deserving student does not have an asset to pledge against his/her education loan for abroad studies. In such cases, some banks and NBFCs may provide an unsecured loan. Students with extraordinary merit and an exceptional academic track record have a high probability of getting an unsecured education loan.
- The creditworthiness of the co-borrower – Creditworthiness is a trustworthiness factor determined by the lender after a detailed evaluation of a co-borrower’s credit history, financial status, and net worth/income. It helps lenders analyze the borrower’s capability to repay the loan on time. Students whose co-borrowers have a good credit score, stable income, and a clean financial reputation may get some relief from collateral requirements.
- The reputation of the academic institute – Banks and NBFCs run a high risk of loss in unsecured education loans as the student may not get gainful employment opportunities after course completion. In such cases, the reputation and ranking of the academic institute play a very important role. Students with confirmed admission to top-ranking institutes of the world have a high probability of getting high-paying jobs. Hence, their ability to repay the loan is substantially enhanced.
Check: Best Education Loan Providers in India for Study Abroad
What are the Various Forms of Collateral that Lenders Accept?
In general, secured education loans accept three forms of collateral:
- Immovable Property - Lenders will accept non-agricultural land with a clearly defined border as well as immovable property such as a standalone home, apartment, or plot. Land used for agriculture is not acceptable as collateral. The property will be evaluated by an appraiser hired by the bank. Collateral must be pledged with all of the original property papers, such as the registered sale deed, the authorised plan or map, and any links or chain documents.
- Liquid Assets - Fixed Deposits (FDs), Life Insurance Policies (LICs), and Government Bonds are examples of liquid assets. Since these assets may be instantly transformed into cash, they are purchased at their exact worth. Some considerations for borrowers include keeping their FDs with the same institutions they are borrowing money from. A new FD can be created for the purpose or the loan can be taken out on an existing FD. The FD's holder will continue to receive interest payments as usual. When used as collateral, LIC should be a maturing policy with a set maturity date.
- Third-party Collateral - In the event that the borrower is without collateral of their own, they may pledge third-party collateral held by friends or family members. In this situation, the original paperwork for the collateral must also be presented.
Collateral is required by lenders to minimize the risk of loss. However, the compulsion and value of collateral depend on each student’s profile and financial requirements. Some NBFCs even provide unsecured loans up to Rs.20 Lakh to meritorious students. Weigh your options and select a lender that gives you clarity and a cost-effective education loan.
In case you are facing difficulty in arranging an education loan you may also apply for a loan through Shiksha.
Shiksha has partnered with India’s topmost and trusted loan providers who will assist you in getting an education loan. Find out more!
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Collateral for Education Loan FAQs
Q. What is a secured education loan?
A. In order to qualify for a secured education loan, the borrower must pledge collateral as security for the loan. An asset, such as real estate or other valuable belongings, may serve as the collateral. By putting up collateral, the borrower lowers the risk for the lender, which could lead to better loan terms like longer repayment terms or cheaper interest rates. In the event that the borrower defaults on the loan, the lender has the right to seize and sell the collateral in order to recoup the unpaid balance.
Q. What are the benefits of taking an education loan?
A. Here are some of the benefits of taking an education loan:
- Technical benefits: These include section 80E tax benefits, long-term moratorium, flexible payback options, etc.
- Other benefits: Tuition, living costs, textbooks, and other educational costs are all covered by education loans. Without immediate financial strains, they can assist students in pursuing their selected courses and degrees. By taking out an education loan, students can become financially independent and assume responsibility for their own educational costs.
To achieve a positive borrowing experience, it is advised to carefully investigate loan possibilities, comprehend the terms and conditions, and create a repayment strategy.
Q. What are the various criteria for deciding the value of collateral for an education loan?
A. The value of collateral for an education loan can vary depending on several criteria. Here are some factors that lenders may consider when determining the value of collateral:
- Type of Collateral: Collateral can take many different forms, including residential real estate, non-agricultural land, fixed deposits, commercial real estate, or other valuable assets. The market value of the collateral and the lender's evaluation of its liquidity and stability will determine how valuable it is.
- Loan Amount: The loan amount requested could have an impact on the collateral's value. The loan-to-value ratio, which compares the loan amount to the value of the collateral, is a factor that lenders frequently take into account. The type of collateral and the lending institution's rules can influence the allowable loan-to-value ratio.
- Repayment Capacity: The repayment ability and creditworthiness of the borrower are key factors in evaluating the value of collateral. In order to determine whether a borrower will be able to repay the loan, lenders consider things including their income, employment history, and credit history.
Keep in mind that a variety of criteria, such as the type of collateral, loan amount, collateral evaluation, repayment capacity, and lender policies, influence the value of collateral for an education loan.
Q: Â How can I get admission in the University of Manchester?
The application process at the University of Manchester may vary depending on the course and level of study. However, here is the application process for UG and PG courses:
The Undergraduate Application Process:
Step 1: You can apply through the UCAS common application portal.
Step 2: Go to the website and select the course you are interested in.
Step 3: Ensure you meet the Entry requirements (Academic qualifications, English proficiency, etc.
Step 4: Once you decide on the course, submit documents such as SOP, Transcripts and personal statements.
Check out: tips to improve your SOP.
Step 5: You can track the application's progress through your given credentials by UCAS.
Step 6: Once the applicant submits the application to UCAS, it forwards to the University, and the admission teams carefully analyse the application document.
Step 7: The university will send you an offer letter once selected. Hence keep checking your UCAS portal for your application status.
The Postgraduate application process:
Step 1: Select the postgraduate course you are interested in from the University of Manchester.\
Step 2: Ensure you meet the entry requirements for the chosen program, as they vary depending on the course.
Step 3: Complete the online application by providing your personal information.
Step 4: Upload the required documents, such as Academic transcripts and proof of English language proficiency ( TOEFL/ IELTS). experience in your fields and references (depending on the course). You also may require Two LORs depending on the course.
To make your admission better, check out the following: How Admission Officers Evaluate your application.
Step 5: If your application is successful, you will receive an offer from the University of Manchester.
Q: Â Does the University of Essex require IELTS?
International students whose native language is not English must meet the University of Essex English language requirements to get admission. The university accepts IELTS scores as proof of English language proficiency. Mentioned below are the IELTS scores required for UG and PG admission at the university:
English Language Test | Score |
|---|---|
IELTS | Overall score of 5.5 to 8.0 with minimum of 5.5 to 7.5 in each section |
The university also accepts the score of other English language tests such as TOEFL and PTE for admission to undergraduate and graduate programs:
English Language Test | Score |
TOEFL iBT | Overall score of 72 to 114 |
PTE | Overall score of 59 to 84 with minimum of 59 to 80 in each section |
Also read: Required IELTS Score for UK Universities
Q: Â Is university of West of Scotland good for international students?
The University of the West of Scotland has five modern and diverse campuses in United Kingdom. The University has welcomed more than 3,000 international students which are representing 1/3 of the globe. They also have 130 European partners who are actively in global study and exchange options through the Commonwealth universities programmes. The University also offers study abroad opportunities for UWS who are eligible for the same and also have more than 20 transnational education partners worldwide which helps them deliver UWS Bachelors and Masters Degrees around the world.
Q: Â How to prepare for UK 10th board exam 2025?
Those who are preparing for the UK Class 10 exam 2025 are recommended to follow the tips below.
- Know the exam pattern
- Make a proper time table as per the syllabus
- Solve previous year question papers
- Make short notes of important formulas and theorems
- Revise regularly
- Figure out weaker areas and learn them well
With proper planning and hard work, students can easily clear the UK 10th board exam.
Q: Â What is University of Wales, Trinity Saint famous for?
University of Wales, Trinity Saint (UWTSD) was founded in 2010, is a public institution for higher education and research at multiple locations. It was set up under the 1828 royal charter of Lampeter, the institution was the result of the merger between Trinity University College and the University of Wales. The institution merged with the Swansea Metropolitan University in 2013.
- Top Ranked University: The UWTSD is not ranked by any major ranking body, however as per the university ranking given on the official website of the university, it is ranked among:
- #1st in Wales and UK Top 5 Film Production and Photography
- #1st in Wales and UK Top 5 Fashion and Textiles
- #1st in Wales and UK Top 20 Graphic Design
- #1st in Wales and UK Top 5 Education
- #1st in Wales and UK Top 20 Sports Science
- #1st in Wales and UK Top 20 Mechanical Engineering
- #1st in Wales for Fine Arts
- Variety of Courses: UWTSD offers more than 300 programs at various levels including undergraduate, postgraduate degrees as well as multiple online courses.
- Highly distinguished and learned faculties: the faculty at UWTSD is highly learned and distinguished which enables students to be the best in their field of study.
- High Placements: According to Graduate Outcome data 2019-2020 quoted by the UWTSD, more than 95% of its graduates were found to be employed within 15 Months of graduation. The average salary of a graduate is not explicitly released by UWTSD, however, as per some unofficial sources the average salary of the graduates of UWTSD is approximately INR 30-35L. with the highest salary being reported as high as INR 66.5L for jobs in Financial Services.
Q: Â Why indian students choose to study at Hult International Business School - UK?
Indian students choose to study at Hult International Business School in the UK for several reasons, including its highly ranked programs, global outlook, and career support. Hult offers a range of full-time master’s degrees, immersive bachelor's programs, and MBA options that prepare students to excel in the global job market. The school is the largest and top-ranked global business school, providing students with an incomparable universal outlook. Additionally, Hult's focus on experiential learning, extensive career support, and the opportunity to study at multiple campuses around the world are attractive to Indian students seeking a global business education. Furthermore, the school's emphasis on innovation and meeting the needs of students and employers may also contribute to its appeal to Indian students
Q: Â What rank is Wolverhampton University in UK?
The University of Wolverhampton is one of the best universities in the United Kingdom. The university is consistently ranked among the best universities nationally and globally. For nearly 200 years, the University of Wolverhampton has been consistently providing a quality of education to students and producing highly skilled graduates. The national rankings of the University of Wolverhampton are given below:
| Ranking Body | Ranking |
|---|---|
| The Guardian University Guide 2024 | #101 |
| The Complete University Guide 2024 | #117 |
Q: Â How to download UK Board 12th date sheet 2024?
Following are the steps to download the UK 12th date sheet 2024.
- Open the Uttarakhand Board's official website at ubse.uk.gov.in
- Click on 'Examination Scheme' available on the homepage
- A new window will appear on the screen containing a link of the UK Board 12th date sheet 2024
- Click the link and download the Uttarakhand 12th date sheet 2024
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