The primary objective of an education loan is to provide financial support to students who wish to pursue an education both in India and abroad. Studying at leading institutes is becoming very difficult and expensive for deserving students with the cost of quality education rising each year. Apart from grants, education loans are the most common way to finance schooling.
Education loans are a safe and reliable way to fund education and are preferred by many because they have multiple benefits for both the student and their families. The method of offering education loans for abroad studies has been streamlined over the years. Online application, quick processing time, doorstep service and full expert advice have created trouble-free and easy educational loans.
In India, lenders provide a foreign educational loan to students and thus, before selecting one, students are free to compare and evaluate various products. The characteristics and facilities vary from bank to bank, but most deliver the following advantages to students and their families:
- Simple to register online
- Tax benefits, as defined in Section 80E
- Flexible terms and conditions for refund
- Long reimbursement period
Nonetheless, with increasing competition, it is essential to collect complete information relating to education loans to be able to make an informed and wise decision. The financial terms may be somewhat unclear, but their understanding is crucial for you to decide on a loan for education that best suits your financial needs.
Education Loans are of two kinds:
- Unsecured education loans which are without security
- Secured education loans that include security
Before you start your loan application, you must be aware of the significance of collateral, its need, the types of collateral accepted by a lender and the difference between collateral and non-collateral education loans.
Collateral is an asset pledged toward your tuition loan. It can be a tangible asset such as a house or an intangible asset that is a fixed deposit. Banks and financial institutions are applying for risk-mitigation collateral. If a borrower fails to make the education loan repayment, the collateral will be used to pay the same amount. A collateral cover can be a house, apartment, bungalow, non-agricultural land, fixed deposit, life insurance, etc.
Collateral-secured loans for education are referred to as secured loans. Several banks and financial companies provide education loans without collateral which are known as unsecured loans. Because the risk factor associated with guaranteed loans is lower, the interest rate of a secured loan may be lower than that of an unsecured loan.
Different banks and NBFCs take on various forms of collateral. Nevertheless, common assets which can be pledged against your loan for education are:
- Quantifiable Assets – Apartment, House, Bungalow, Shop, Vehicle, Non-agricultural Land etc.
- Quantifiable Assets – Life Insurance, Stocks, Fixed Deposits etc.
The value of the collateral of your bank or NBFC may be equal to, less than or more than your loan amount. Each student has a different set of requirements and profile. Every student has varied needs and profile. Consequently, the value of collateral for education loan for abroad studies depends on many factors, including:
- Student academic record
- Borrower’s credit reputation
- Reputation of the education institute
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