Can I Take an Education Loan on Agricultural Land?

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    In India, higher education is seen as a passport to a well-settled career. But, with the cost of education inflation currently pegged at 10%, it is no wonder that higher education is becoming a pricey affair and many students have to give up their dreams of higher studies.

    At such times, an education loan is a blessing for students who need financial help to pursue their higher education dream. It makes higher education and the associated study costs within reach of all such students. 

    Introduced by SBI in 1995, an education loan is not only beneficial for students who are unable to finance their higher education but also for those who want to keep their savings safe for personal contingencies, get tax benefits, and build a good credit score.

    It is no wonder then that education loan firms have disbursed INR 11,000 crores in education loans during the 12 months ending September 2020. However, many times education loan seekers have numerous doubts regarding the policies that guide education loan sanction.

    Among all the various queries, one of the top ones that we often get is whether a student can take an education loan against agricultural land. In this blog, we will try to answer this question and help make things clear for all such students. 

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    Can I take an education loan on agricultural land? 

    Well, theoretically the answer to this question is, Yes. But on digging a little deeper we realize that this is not possible practically.

    Even though the RBI has suggested that banks sanction education loans to farmers and their children, the reality is quite different. When we look at the terms and conditions for sanctioning a secured education loan, we realize that all public banks, private banks, and NBFCs have mentioned that agricultural land is not accepted as collateral for an education loan.

    The reasons for this are not very clear, one possible reason for this could be the fact that agricultural land cannot be used to raise security in case the education loan becomes a Non-Performing Asset.

    The very purpose of collateral is to be a means of recovering the loan money in case the borrower defaults on the loan and this would not be the case with agricultural land, thus beating the very purpose of asking for collateral. 

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    What is the next best option if education loan against agricultural land isn't possible?

    Now that we know that it is not practically possible to get a secured education loan on agricultural land, below are some alternate ways in which a student can get a secured education loan: 

    1. Find another immovable collateral that can be attached with your loan application - Lenders accept many different kinds of tangible collateral for sanctioning an education loan such as any flat, house, plot with boundary, shop, etc. In case a borrower does not have the property in his/her name, they can also attach third-party collateral for their education loan, provided the owner agrees to mortgage the property on behalf of the student. 
    2. Attach any movable collateral with your education loan - A student can also pledge intangible assets such as Fixed Deposits, Government Bonds, Mutual Funds, National Savings Certificates, Life Insurance Policies, etc. The assets could be in the name of the student or even a relative. 
    3. Pledge gold ornaments - Students can also mortgage gold ornaments for their education loan. 

     

    It should be noted here that the value of the collateral being pledged must be equal to or higher than the loan amount being applied for. Hence, a borrower can pledge any one of the above collateral or even attach more than one in case the value of one collateral is less than the loan amount being requested.  

    Check Your Education Loan Eligibility Apply Here

    What should you do in case you cannot pledge collateral?

    If a student is unable to arrange any of the above-mentioned collateral, even then there is hope for them in the form of unsecured education loans. Most lenders provide unsecured loans to deserving students. Some like private banks and NBFCs even raise their upper loan limit for an unsecured education loan for meritorious students. 

    Still confused with the various lenders and education loan schemes and looking for help with an education loan?

    Well, get in touch with GyanDhan - India’s first education financing platform,  and get all your education loan queries resolved from experts. GyanDhan is the highest-rated study abroad financing marketplace in India and is known for our doorstep service, quick and higher loan approvals and for helping our students get the best deals on education loans.

    Gyandhan will help you not just with your education loan queries but also will assign a dedicated loan counselor who will provide guidance on the best education loan for your case. Not stopping there, we will also help you with the loan application, sanction, and disbursement process. Get in touch with us now and get ready for your higher education journey. 

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