- Key features of collateral based loans
- Types of collateral
- What if your collateral is not located in the same city?
- What happens when you fail to repay your loan?
- Documents required
- Benefits of collateral - based loans
- Why should you apply early for collateral based loans?
- Frequently asked questions
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Tangible assets:
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Intangible assets:
- Residential property
- Fixed deposits
- Government bonds
- Insurance policies
- Open land with boundaries
- Agricultural land
- Open land without boundaries
- In Telangana: Notary registered property
- In Karnataka: B Khata property
- In Delhi: GPA or leasehold properties
- Registered sale deed
- Approved plan or map of the constructed property
- Chain documents, evidencing the ownership history of the property for the last 30 years.
- Latest property tax receipt.
- Occupancy proof
- Property title deed
- Original registration receipt for the above agreement
- Allotment letter by the municipal corporation/authorized govt. authority such as MHADA, CIDCO, HUDA, DDA, JDA, GIDC, etc
- Previous chain of sale deed establishing title.
- Most recent property tax bills or electricity bills having the same address.
- Approved plan/map if the property being pledged is a built one.
- Link documents that prove the ownership history of the said property for the previous 30 years.
- A latest property tax receipt
- NA order
- Urban land ceiling order
- NOC from a builder or society
- Share certificate
- Letter of allotment
- Conveyance deed of society
- If CIDCO / MHADA property: NOC and transfer letter
- Urban land ceiling certificate
- NA certificate, if not included in the sale deed
- 7/12 extract, if not included in the sale deed
- Encumbrance certificate
- RTC (Record of tenancy certificate)
- Conversion order (from agriculture to residential)
- Khata certificate ( A or B )
- Property tax receipt
- Encumbrance certificate
- Lower interest rates: One of the primary benefits of secured education loans is that they typically come with lower interest rates compared to unsecured loans. Lenders are willing to offer lower rates because the collateral reduces their risk.
- Higher loan amounts: Secured loans often allow borrowers to access higher loan amounts since the collateral's value can be substantial. This can be particularly useful for expensive education programs abroad.
- Flexible repayment terms: Lenders may offer more flexible repayment terms, including longer tenures, which can help borrowers manage their loan repayments comfortably.
- Easier approval: Secured loans are generally easier to secure for individuals with limited credit history or lower credit scores because the collateral acts as security.
- The bank needs to verify and cross-check all the documents related to the collateral being pledged.
- Missing or wrong documents may lead to rejection of loan applications or more processing time.
- Bank conducts a property evaluation.
- Abroad education loan without collateral
- Abroad education loan interest rate
- Abroad education loan without parental income
- Expenses covered under abroad education loan
- Documents required under abroad education loan
- Why A Bank Would Decline An Education Loan With Collateral
- How to plan your education loan repayment?
- Pledge: A pledge is a type of security interest where a borrower pledges personal property as collateral for a debt or loan.
- Mortgage: A mortgage, on the other hand, is a type of security interest specifically related to real estate.
Updated on: 30 Sep 2023
When obtaining a loan, the lender may require collateral to mitigate the risk associated with lending money. If the borrower is unable to repay the loan, the lender can seize the collateral and sell it to recover the outstanding balance. A loan where security is required is termed a secured loan. Table of Content Description Public banks Private banks NBFCs Loan amount Up to INR 2 Cr. Up to INR 80 Lakh Up to INR 80 Lakh 9.40% - 10.90% 11% - 12.75% 12% - 14% Borrowers can basically pledge two types of collateral, when applying for a secured education loan. They are as follows: Tangible assets include real estate assets such as houses, flats, etc. Kindly note that agricultural land or land that falls under the jurisdiction of gram panchayat is not accepted as collateral by lenders. However, non-agricultural open land that has clear boundaries is accepted as collateral for secured education loans. Intangible assets include liquid securities such as fixed deposits, mutual funds, ULIPs, Life Insurance policies, government bonds, etc. Borrowers can pledge an old or open a new fixed deposit for an education loan. However, the fixed deposit holder will continue to get any interest received on these intangible assets. Banks generally accept the following types of collateral for an abroad education loan. Lenders generally do not accept the following immovable properties: Looking For An Abroad Education Loan? If the property you want to pledge fulfills the bank's eligibility criteria then you can use it as collateral. Using a collateral that is not located in the city you live is possible and such instances are commonly referred to as Multi-city cases and are typically approved by most banks. To pledge an asset located in a different city, require bank branches to coordinate with each other. The branch handling the paperwork sends a request to the branch nearest to where the property is located. This is a common concern among students who have secured their education loans with collateral. There is often a misconception that missing a single EMI payment will lead to the immediate seizure of pledged collateral. However, that is not true. Banks provide borrowers with ample time and opportunities before actually taking possession of the collateral. The list of documents required for collateral, depends on several factors, primarily: property type, purchase history, and location. Broadly, the following documents are required: Mumbai or Pune Bengaluru Note: There can be additional documents required depending upon the city from where the loan application is made. Also, the list of documents required varies from one lender to another. Collateral based loans or secured education loans require the borrower to pledge an asset as security for the loan. This collateral provides assurance to the lender that they can recover their funds even if the borrower defaults on the loan. This type of loan comes with a bunch of benefits. A word of caution for those who are planning to apply for an education loan with collateral. Make sure that you have sufficient time in hand when applying for such a loan. This is because secured loans take a longer time to get sanctioned because - The best way to cross the above-said hurdles is by applying early so that you have sufficient time to collect and submit the documents while the bank also has enough time to verify the collateral documents. When seeking an abroad education loan, understanding the various collateral security options available is crucial. Ultimately, collateral security can help you secure the funding you need to pursue your dreams of studying abroad, but it's essential to manage it responsibly to avoid potential risks. To ease the process, you can start your journey with GyanDhan. When you apply via GyanDhan, the evaluation of the property and legal report will be done in advance so that it reduces the time later on. The valuation or legal report has a validity period between three months to three years, so getting it done earlier would only benefit the applicant in the quick processing of their education loan application. To start your abroad education loan journey with GyanDhan, all you need to do is check your education loan eligibility here. Read more about: Lenders typically accept third - party collateral. Lenders do not necessarily limit collateral acceptance to assets provided by immediate family members. Collateral can come from various sources and may include assets from individuals beyond your immediate family. The acceptability of collateral often depends on the loan amount required and the value of the collateral. Selling the pledged asset before fully repaying the education loan is not allowed. The asset serves as collateral until the loan is completely paid off. If you do sell the asset prior to repaying the loan, the lender retains the right to take possession of the asset and sell it to recover the outstanding loan amount. Yes, you can pledge other assets as collateral for an education loan, such as fixed deposits, mutual funds, life insurance policies, or gold. The minimum value of the collateral should be equal to or more than the loan amount required. Lenders typically assess the loan amount based on the current market value of the collateral security provided. Collateral is not a mandatory requirement for all education loans. Some lenders provide unsecured education loans to eligible borrowers with favorable credit histories. However, unsecured education loans typically come with higher interest rates compared to secured loans. Yes, banks accept residential properties as collateral for loans. Home equity loans and mortgages are examples of loans where the property serves as collateral. However, keep in mind that the value of the property and the loan-to-value ratio will play a role in determining the loan amount. Yes, many banks accept investments and financial assets such as stocks, bonds, or mutual funds as collateral. However, the acceptability and valuation of these assets may vary among banks, and there may be restrictions on the type and liquidity of the investments. No, co-signed loans typically involve a guarantor who is legally responsible for the loan if the borrower defaults. The collateral, in this case, belongs to the borrower and not the co-signer. Some banks accept valuable possessions like jewellery or artwork as collateral, but it depends on the individual bank's policies. The value and authenticity of the possessions may need to be assessed by experts appointed by the bank. Verification in collateral security confirms the existence and accuracy of collateral-related details. Valuation, on the other hand, determines the financial worth of the collateral. While verification validates collateral, valuation assesses its monetary value. Both processes are crucial for evaluating the adequacy and reliability of collateral security. A fixed deposit is an intangible financial asset. It does not have physical form but represents a contractual agreement between an individual or organization and a financial institution. The fixed deposit represents a legal claim to a specific amount of money that has been deposited for a fixed period, earning a predetermined interest rate. Although intangible, fixed deposits provide a secure and reliable investment option for individuals looking to grow their savings. Pledge and mortgage are two distinct legal terms that refer to different types of security interests in property.
Collateral refers to an asset or property that a borrower pledges to a lender as security for a loan. It serves as a form of protection for the lender in case the borrower defaults on the loan or fails to fulfil their obligations.
A secured loan is easier to get sanctioned, as the bank views the collateral as a security that can be used in case the borrower fails to repay the loan or the loan becomes a Non - Performing Asset (NPA). In the case of a secured loan, (loan with collateral) the loan amount sanctioned depends on the value of the collateral that is pledged with the loan. Key features of education loans with collateral
Different types of collateral security
Collaterals accepted by banks
Collaterals not accepted by banks
Fill the form to get free expert helpWhat if the collateral is not located in the same city?
What happens to your collateral if you fail to repay your education loan?
Documents required for a collateral based loans
Common documents:
Additional documents if you’re applying for an education loan with a property in the following cities:
Hyderabad
Benefits of collateral based loans
Why should you apply early for a loan with collateral?
Frequently asked questions
Do lenders accept collateral from only the immediate family?
Can I sell my property before repaying my loan?
Can I pledge something else as collateral other than property?
What should be the minimum value of the collateral for abroad education loans?
Do all lenders require collateral for an abroad education loan?
Can I use my home as collateral for an abroad education loan?
Can I use investments or financial assets as collateral?
Do banks accept co-signed loans as collateral?
Can I use personal possessions like jewellery as collateral for taking an education loan?
What is the difference between valuation and verification of collateral security?
Is fixed deposit a tangible or intangible asset?
What is the difference between a pledge and a mortgage?
First published date: 05 Mar 2021
