Education Loan Against Property: A Complete Guide for Students and Parents

Securing funds for higher education can often be challenging, but the good news is that various financial institutions offer education loans to help cover the costs. One option that stands out is an education loan against property, allowing you to pledge your property in exchange for a large loan. This guide covers everything you need to know about this loan, from its benefits to how it compares to unsecured loans.

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What is an Education Loan Against Property?

An education loan against property is a secured loan where you pledge a residential or commercial property as collateral. In return, banks and other financial institutions provide loans to fund educational expenses. This loan is popular for those seeking higher education, especially abroad, where costs can be significant.

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Interest Rates on Education Loan Against Property

Interest rates on an education loan against property are typically lower than unsecured loans since the loan is secured. Here's a comparison of interest rates:

Factors Affecting Interest Rates:

• Loan Tenure: Longer tenures may have lower rates.
• Property Value: A higher property value can help secure better rates.
• Credit Score: A good credit score increases the chances of a lower interest rate.

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Education Loan Against Property: Features and Benefits

Here are the features and benefits of an education loan against property.

1. Lower Interest Rates

Since this is a secured loan, the interest rates are lower, usually between 8% to 11% per annum. It’s more affordable compared to unsecured education loans or personal loans.

2. Large Loan Amount

Depending on the market value of your property, income, and credit score, you can avail larger amounts of loan. This amount can comfortably cover tuition fees, accommodation, travel, and other study-related expenses, especially for courses like MBBS, MBA, or international degrees.

3. Simple Documentation & Online Access

Most lenders ask for basic documents like property papers, income proof, and identity verification. Once approved, you can easily track your loan, EMI schedule, and repayment status online through the lender’s digital platform.

4. Flexible Repayment Tenure

Most lenders offer flexible repayment tenures wherein you can repay your loan over a longer period of time.This helps keep your EMIs affordable and allows you to plan your finances better after graduation.

5. Flexible EMI Options

Lenders offer various repayment plans, such as EMI holiday (grace period during the study term) or step-up EMIs (lower EMIs initially and higher later), which are helpful if you plan to repay once you start earning.

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Why Should You Choose an Education Loan Against Property?

Opting for an education loan against property has several advantages you won’t find in unsecured loans. Here are some of the reasons why it might be the best option for funding education:

‍Also Read: SBI Education Loan for MBBS Students: Eligibility & Process

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How to Apply for an Education Loan Against Property?

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Getting an education loan against property involves a few steps. Here’s a quick guide on how to apply:

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Eligibility Criteria for an Education Loan Against Property

You'll need to meet specific criteria for an education loan against property. Here’s what most banks and lenders look for:

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Documents Required for an Education Loan Against Property

You must provide several documents when applying for an education loan against property. These typically include:

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Tip: Keep multiple copies of all documents ready, as banks often require originals for verification and photocopies for record-keeping.

Read More: How to Get an Education Loan for Abroad Studies in 2024?

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Minimal Documentation. Higher Chances of Approval. Easy Online Processes. Check Your Eligibility. 

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How is an Education Loan Against Property Different From a Regular Education Loan?

Wondering whether to pledge your property or go for an unsecured loan? Let’s compare the two:

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Can I Get an  Education Loan Without Property?

If you’re wondering, "Can I get an education loan without property?" The answer is yes! You can get an unsecured education loan, which doesn’t require you to pledge any property. 

However, this option comes with certain limitations.

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‍Who Should Opt for an Education Loan Against Property?

Not everyone is suited for an education loan against property, but for some, it’s the most practical choice. Below are the types of individuals for whom an education loan against property makes the most sense: 

1. Ideal for Families Owning Valuable Property

If your family owns residential, commercial, or any high-value property, you can use it as collateral to secure a large education loan. This allows you to access funds without selling the asset.

2. Suitable for Students Pursuing High-Cost Education

An education loan against property is perfect for students planning to study expensive courses like MBBS, MBA, or international degrees. You can get a high loan amount enough to cover tuition fees, living expenses, and other educational costs.

3. Best for Borrowers Seeking Affordable EMIs and Longer Tenure

This type of loan offers lower interest rates and flexible repayment options. You can choose a longer repayment period—up to 15 years—which reduces the EMI burden and makes repayment more manageable.

Can I Get an Education Loan on Agricultural Land? 

In India, getting an education loan by offering agricultural land is difficult. Even though agricultural land can be valuable, most banks and lenders don’t accept it as collateral.

Reason being that there are a number of limitations due to which lenders have their hands tied for giving loans to farmers’ children. 

However, it's not impossible to get one.  Explore the education loans available to the children of farmers for an easy guide on securing an education loan on agricultural land. 

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How to Make the Best of Your Education Loan Against Property? 

Here are some tips to help you stay financially secure and reduce your repayment burden in the long run:

1. Plan an effective budget

While planning your education loan, assess your actual financial requirements and avoid overborrowing. Taking more than necessary increases your EMI burden and extends the repayment period. A well-planned budget helps ensure financial stability throughout your course.

2. Understand Loan Terms Clearly

Before signing the loan agreement, carefully review all terms and conditions. Pay close attention to the interest rate type (fixed or floating), repayment tenure, processing fees, and any additional charges. Being fully informed helps you avoid unexpected liabilities later.

3. Utilise the Moratorium Period Effectively

Most education loans offer a moratorium period during the course duration and sometimes a few months after completion. Use this grace period to focus on your academics and prepare financially for the repayment phase.

4. Consider Prepayment Options

If you receive a financial surplus, such as a bonus, internship stipend, or family contribution, consider making part-prepayments. This helps reduce the overall interest cost and can significantly shorten your loan tenure.

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Government Schemes for Education Loans Without Property

Students ask, " Can I get an education loan without property through government schemes?" The answer is yes, and there are several options available. The Indian government has introduced schemes to help students from economically weaker sections.

‍Read More: How to Get an Education Loan for Abroad Studies in 2024?

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Key Factors to Consider Before Choosing an Education Loan Against Property

Before you decide to pledge your property, keep these factors in mind:

Loan Amount Needed

• Consider the total cost of education, including tuition, accommodation, and other expenses.
• An education loan against property is ideal if you need a large loan amount, as it typically offers up to 80% of the property’s value.

Repayment Capacity

• Assess your ability to repay the loan based on future job prospects.
• Lower EMIs may seem manageable, but a long-term debt could weigh you down.

Property Ownership

• Make sure the property is legally clear and undisputed.
• If the property is jointly owned, all owners must agree to pledge it.

Also Read: Education Loan for Engineering - BTech Loan Interest Rates

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Choosing an education loan against property can be smart if you need a large loan at a lower interest rate and have property to pledge. However, it comes with the risk of foreclosure if you default. On the other hand, if you're asking, "Can I get an education loan without property? " An unsecured loan might be a better option if you need a quicker, less risky solution, though it typically comes with higher interest rates and a shorter repayment tenure.

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FAQs About Education Loan Against Property

What is an education loan against property, and how does it work?

An education loan against property is a secured loan where you pledge your residential or commercial property to get a higher loan amount for educational purposes.

Can I use my commercial property for an education loan against property?

Yes, both residential and commercial properties can be used to secure an education loan against property, depending on the lender's policies.

How much loan can I get through an education loan against property?‍

You can typically get up to 70-80% of the market value of your property as an education loan against property.

What documents are required for applying for an education loan against property?

To apply for an education loan against property, you'll need property documents, proof of admission, income proof, and identity verification documents.

‍Is there a risk involved in taking an education loan against property?

Yes, if you default on the payments, the lender has the right to take possession of the pledged property in an education loan against property.‍

Can I get an education loan without property for international studies?

Yes, many banks offer unsecured loans. So, if you're asking, "Can I get an education loan without property for international studies?" The answer is yes, but the loan amount may be lower.

What is the interest rate for an education loan against property?

The interest rates for an education loan against property are typically lower than unsecured loans, ranging from 8.5% to 10.5%.‍

Can I get an education loan without property if my credit score is low?

Yes, it’s possible to get an unsecured loan, but having a low credit score might result in higher interest rates or difficulty in getting the loan approved.

Is an education loan against property a good option for studying abroad?

Yes, an education loan against property is a good option for studying abroad, as it allows you to borrow a larger amount and offers a longer repayment tenure.

Can I get an education loan without property if I don’t have a co-applicant?

Getting an unsecured education loan without a co-applicant is challenging, as most lenders require a guarantor or co-applicant with a steady income.

What happens if I cannot repay my education loan against property on time?

If you fail to repay an education loan against property, the lender may seize and sell the property to recover the loan amount.

What is the maximum tenure for an education loan against property?

The maximum repayment tenure for an education loan against property is usually up to 15 years, depending on the lender.

Can I get an education loan without property for post-graduation courses?

Yes, you can get an education loan without pledging property for post-graduation courses, but the loan amount may be lower, and interest rates may be higher.

Are there any government schemes for education loan without property?

Yes, schemes like the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) allow students to get an unsecured education loan without property for specific institutions.

Is taking an education loan against property better than an unsecured loan?

If you have property and need a larger loan with lower interest rates, an education loan against property is better. However, if you're wondering, Can I get an education loan without property?," then an unsecured loan may be the right choice for smaller amounts.