Invest in Your Future, Not in High Interest – Get a Collateral Loan

Banks accept collateral in three main categories when applying for a secured education loan. Let's swing by each one of them:

1. Immovable Property: It includes assets such as land, houses, or commercial spaces which can't be physically moved. These are widely accepted as collateral by banks.

Residential Property - This is the most commonly offered collateral. It includes Houses, Apartments, & Villas. Requirements:

• The property must be owned by the borrower or co-applicant.
• It should be free of legal disputes.
• Proper documentation and clear property boundaries are required.

Commercial Property - Some banks consider commercial properties like Shops & Offices. Requirements:

• The property should be in the borrower or co-applicant’s name.
• Legal ownership and proper documents must be provided.
• Some banks, like ICICI and IDFC, do not accept commercial property as security.

Non-Agricultural Land - Non-agricultural land (such as plots for houses or commercial buildings) can also be used as security. Requirements:

• The land must be legally registered.
• All documents must be available.
• Some banks, like Union Bank, may accept agricultural land under specific conditions.

2. Liquid Securities: Liquid securities are financial assets that can be easily converted into cash. Banks prefer them due to their high liquidity.

Fixed Deposits (FDs) - Banks allow borrowers to use FDs as collateral with these conditions:

• The FD must be in the borrower or co-applicant’s name.
• Only the principal value is considered.
• The bank will hold the FD until the loan is repaid.

Life Insurance Policies (LICs) - Life insurance policies can be used as security for an education loan. Requirements:

• The policy must have a surrender value (not just face value).
• Term insurance plans without surrender value are not accepted.

Government Bonds - Banks recognize government bonds as collateral since they are backed by the government. Requirements:

• The face value of the bond is considered.
• The bonds must be in the borrower’s or co-applicant’s name.

3. Third-Party Collateral: If the borrower does not own property, a third party (such as a parent, relative, or family friend) can provide their assets as collateral.

Important Notes:

• The third party must submit original documents.
• The lender will consider the third party a guarantor for loan repayment.

By offering collateral, students can secure higher loan amounts with better interest rates.

Understanding the key differences between collateral and non-collateral education loans can help you choose the right financing option for your study abroad journey. Here’s a quick comparison to guide your decision.