What is Collateral Security for Educational Loan?

Studying abroad in top international universities is on most students' bucket list. However, the budget is the deciding factor. Students can borrow an education loanto finance their dream of getting overseas education. Banks require collateral security, such as property or assets, to cover the risk associated with lending large sums of money.

Banks and NBFCs offer Education loans on collateral security. It means you need to pledge any asset which is equally valuable to the amount of the loan. This asset can be a property, fixed deposit, or other valuable possession. Such kinds of student loans are known as secured education loans. If the primary collateral security does not cover the total loan amount, banks may ask you for additional security.

Students avoid taking education loans that require collateral security due to concerns about the hidden terms and conditions of banks. However, with thorough research, a student loan from any bank is a good option for financing their studies. In this blog, we will help you to understand every piece of information regarding collateral security for educational loans. 

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Note: Do not let finances become a hurdle in your dream of studying abroad. Students, who wish to study abroad, may get in touch with the leading education loan providers through Shiksha Study Abroad.

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What is an Education Loan?

A kind of financial aid, an education loan is required by students who wish to study domestically or abroad and requires the funding of their educational costs. Expenses covered include tuition fees, cost of living, books, and other related expenditures. These are a form of student loans which can be obtained from banks, and government organisations.

As a student, you would be the borrower who wishes to obtain some financial help for pursuing your education abroad. Apart from you your parents or guardians can also apply for a loan. Various types of education loans exist such as private loans and federal loans. An interest rate applies to the education loan which acts as the cost of borrowing money.

Related Reads:

• Education Loan Interest Rates
• How to Repay Student Loans Faster?

Why is Collateral Required for Education Loans?

Collateral or collateral security for an education loan is required to reduce the risk involved in paying off the credit. Since all students don't get jobs immediately after graduating, the banks have no guarantee of their future income and profile. That is why collateral is required. 

It should also be noted that third-party collateral is also considered by the banks for education loans, which implies that one can also obtain the same on the collateral of his or her friend or family member who is willing to pledge his or his asset for your loan.

While doing the risk assessment, the bank considers multiple financial and demographic variables. Every student has a different profile that needs to be fulfilled accordingly, and the bank offers the best collateral options to them based on their requirements and profile.

Property Papers Needed for Education Loans

• Registered Sale Agreement or Will
• Allotment Letter by Municipal Corporation
• Property Title Deed
• Registration Receipt
• Municipality approved the building plan's copy
• Present property tax bill as well as electricity bill sharing the common address
• 30 years link document or EC
• A conversion document will be needed if the agricultural land has turned into a residential

Collateral Security for Education Loan

The following types of collateral can be used by the borrower in order to obtain an education loan:

• Immovable Assets: Also called real estate, immovable property or asset includes land, apartment, plot, etc., which cannot be moved to any other location. It possesses the ownership’s right to it.
• Intangible Property: Those assets that do not have a physical form or presence but possess a value because of the legitimate or intellectual characteristics associated with them are called intangible properties. Examples of intangible property are mutual funds, government bonds, employment contracts, licensing agreements, etc.
• Third-Party Secured Education Loan: In here, a third party such as a parent, relative or a family member of the student will provide collateral to the one providing the loan. That collateral will assure the lender that the loan’s repayment will be done in case the student fails to pay the same later on.

Know More About Loans:

• Collateral for Education Loan: Everything You Need to Know
• Eligibility Criteria for Education Loan
• The A to Z of Study Abroad Loans

That's all about the topic. We hope that you have got all the information related to this topic. Contact India’s leading education loan providers through Shiksha Study Abroad For more queries. Do write to us in the comments below. Or request a call back from our Shiksha Study Abroad Counselling Services.