December 5, 2022

Major Benefits of a Collateral Education loan

Education loan

However, one of the most important purposes for which a collateral loan can come in handy is when a student wishes to pursue higher studies. A collateral education loan is not exactly a loan, but a significant investment that permits one to study the course of their choice from a top-ranking institution. It can help build the foundation for a successful career.

A collateral loan is always a secured loan that lenders give against a commercial or residential property. The property type includes home, office, or even a shop. The borrower must be the owner of the property, and the ownership title must be clear. Most lenders offer these loans for a significantly large sum of money as properties are pledged as collateral. Typically, the amount of property loan lenders approve is based on the applicant’s income, so that the EMI outgo on the borrower’s end does not cross 60% of the borrower’s net monthly income.

Business people tend to use loans against property to meet cash requirements, especially in case of emergencies. Pledging an asset, such as property, helps raise a big loan at a lower rate of interest. Some salaried individuals use this product to meet large expenses like a wedding or the purchase of a new house.

Benefits of Collateral Education Loan for Abroad

Opting for an education loan reduces the strain on family savings and reduces the need to liquidate investments in bonds, fixed deposits, or mutual funds. Besides, the interests levied on education loans are eligible for a tax deduction under Section 80 E of the 1961 Income Tax Act.

Easy Loan Repayment Terms

Most lenders offer lucrative and affordable interest rates on an education loan and preferential rates for top-ranked institutes. They can also offer flexible co-borrower and collateral terms so that the education loan repayment becomes a hassle-free procedure.

Wide Range of Expenses Covered

An education loan for abroad covers not just tuition fees but living as well as travel expenditure, study materials, a laptop, and much more. Hence, such non-fee expenses will no more create an extra financial burden.

Pay Only After Study Completion

EMIs on an education loan scheme are payable only when a student completes the whole study program. Hence, a student need not worry about the repayment right after availing of the loan. What’s even better, the borrower can use the repayment schedule as a guideline when planning finances in the long term.

Opportunity to Build Financial Prudence

Taking on an education loan is a golden opportunity for students to fund their education, without having to depend on their family members. When a student starts repaying their education loan, they simultaneously start building a credit profile. A high credit score coupled with a decent credit history and profile will help them get lower rates of interest on loans in the future.

Experts suggest starting the loan application process before getting the admission letter. Firstly, the legal and property valuation reports can be arranged early, and this helps boost the chances of securing a sizeable education loan sanction. There will be ample time to arrange all documents for the concerned plot of land or property. This enhances the chances of getting the collateral education loan sanctioned way ahead of the scheduled visa interview date.



Benefits of Using an Education Loan Calculator

An Education loan EMI calculator, which is available online and for free, is a utility tool that helps calculate the monthly amount payable to a lender. To calculate the EMI outgo applicable to the study loan abroad, you need to adjust the sliders to alter the values for the principal (P), tenor or time (N), and rate of interest (R). Follow the steps to calculate the EMI:

  • Move the slider to select the desired amount
  • Choose the loan tenor in months
  • Adjust the slider to pick the rate of interest
  • The calculator reflects the total interest, EMI payable, and the total payable amount
  • Recalculate EMI anytime by adjusting these sliders
  • EMI will be instantly reflected when you adjust the sliders

Eligibility for Education Loan on Property

One needs to comply with a few eligibility standards to avail of education loan schemes to study in India and overseas. These are mentioned below.

Requirements Self-Employed Borrowers Salaried Borrowers
Minimum and maximum age limit 25 to 62 years 25 to 70
Citizenship Indians residing in the country Indians residing in the country
CIBIL score 750 or higher 750 or higher

As soon as you achieve the eligibility criteria, carry documents mandated if you are availing of an education loan to study abroad. Salaried borrowers must provide:

  • KYC documents
  • Property papers
  • Bank account statements for the last three months
  • IT returns
  • Recent payslips

Self-employed borrowers need to provide the following

    • KYC documents
    • Documents of the property being pledged
    • Last six months’ bank statements

As standard practice, most financial institutions insist on a guardian or parent to be the co-guarantor/borrower. The number of years of service plays a crucial role here. For instance, if the guardian is nearing his/her retirement age, a lending institution may not consider him to be an eligible guarantor. Starting to save early, hence, is a necessity. If parents start saving for their child’s education soon after their child is born, they would have 18 years to save for their graduation and 21 for their higher studies. Parents need to maintain a separate corpus for education, so that compounding can work in an optimum manner.