Dreaming of sending your child to a top university but worried about the sky-high expenses? Or are you planning to study overseas and require fund assistance? An excellent option for this situation would be an education loan against property (ELAP).
Here, we discuss everything you need to know about education loans against property. Keep reading to learn about these loans, their benefits, eligibility criteria, and more.
What is an Education Loan Against Property?
Think of it like this: you have a property—a house, a flat, or even a shop. That property holds value, right? An ELAP lets you secure your educational expenses against that very value. The amount of loan you can avail yourself of is based on the prevailing market value of your property, making it a solid option for those looking for a huge amount.
Why Should You Consider it?
Here’s why an ELAP is worth exploring:
1. Bigger loan amounts
Let’s be honest—some courses or foreign universities come with a hefty price tag. With ELAP, you can borrow more than regular education loans.
2. Lower interest rates
Since you’re pledging property, the lender sees less risk in lending you money. This reduced risk translates into low interest rates, making it more affordable than unsecured education loans. Lower interest rates also mean smaller EMIs, which can significantly ease your financial burden.
3. Flexible usage
Unlike some educational loans that dictate how you should spend the money given, ELAP lets you decide how to spend your money. Besides tuition fees, you can cover accommodation, travel, study materials, or even some of your living costs. This comes in handy when planning for total expenses.
4. Extended repayment tenure
Most education loans on property come for a more extended period, usually anywhere from 15 years to 20 years. This reduces the monthly EMI burden and allows you or your co-applicant (usually parents) to juggle their other financial commitments along with the loan.
5. Tax benefits
If you borrow money for education, you can benefit from tax deductions under Section 80E of the Income Tax Act. This is only for the interest part of the loan and usually facilitates significant savings over the loan tenure.
How Does an Education Loan on Property Work?
Here’s a simple step-by-step breakdown of how an ELAP works:
1. Property appraisal
The lender would evaluate the worth of the property that you would use as collateral. Most lenders offer loans against not more than 50-70% of the value of the property.
2. Application
The borrower must apply for a loan with a co-applicant (primarily property owners) and usually submit income proof for repayment ability by the co-applicant.
3. Documentation
The applicant and co-applicant should submit all required documents, such as property documents, proof of identity, letters of confirmation of admission, and the fee structure.
4. Loan approval
After verifying all the details, the loan will be approved. Due to the property evaluation and all the documents involved, this may take longer than unsecured loans.
5. Disbursal
The money is now disbursed after approval. Funds can be transferred straight to the educational institution or allocated ad hoc, as applicable.
Eligibility Criteria for an Education Loan Against Property
To qualify for an education loan against property, one has to satisfy these criteria. Here are some of the factors considered by the lenders:
Age: The applicant’s age should generally be in the range of 18-35 years.
Co-applicant: The co-applicant should be a parent, guardian, or spouse (usually the property owner).
Type of property: The property should be free from all disputes and have clear legal ownership.
Proof of academic admission: Admission to any recognised institution is mandatory.
Continuous income: It proves the steadiness of the income for the co-applicant, hence making lenders understand the repayment capability.
Documents Required For an Education Loan Against Property
Address proof: Utility bills or rental agreements.
Income proof: Salary slips, IT returns, or business income statements for the co-applicant.
Property documents: Title deed, property tax receipts, and valuation reports.
Academic proof: Admission letter and fee structure from the institution.
How is an Education Loan Against Property Different From a Regular Education Loan?
You might wonder, “Why not just take a regular education loan?” Let’s compare the two options to make things more transparent:
Feature
Education loan against property
Regular education loan
Collateral requirement
Property needed
No collateral required
Loan amount
Higher (based on property value)
Limited (based on course)
Interest rates
Lower
Higher
Repayment tenure
Longer (up to 20 years)
Shorter (5-7 years)
If you own a property and need significant funds, ELAP can provide a more cost-effective solution.
Smart Tips for ELAP Success
Plan your budget: Borrow only what you truly need. Overborrowing leads to higher EMIs and more extended repayment periods.
Understand loan terms: Before signing, carefully review the interest rate (fixed or floating), tenure, and additional charges.
Use the moratorium period: Most lenders offer a grace period until the course is completed. Utilise this to stabilise your finances.
Prepay if possible: If you receive a bonus or windfall, consider making prepayments to reduce the loan tenure and interest burden.
Who Should Opt for an Education Loan Against Property ?
An education loan against propertyis ideal for:
Families owning valuable property.
Students seeking significant funds for high-cost education.
Borrowers who prefer lower EMIs and extended repayment periods.
However, a regular education loan may be a better choice if you’re uncertain about pledging property or need quick funding.
Conclusion
If you seek financial support for your studies, consider a loan against property from Tata Capital. Our experts can guide you through the process and help you achieve your educational goals. Get started today and make your dreams come true with Tata Capital!
It offers more significant loan amounts, lower rates, and flexible repayment options.
What are the interest rates for an education loan against property?
The interest rates for an education loan differ with financial institutions. Be sure to analyse and compare interest rates and loan terms across lenders to find the best one for you.
How do I repay my education loan on property?
You can repay your education loan on property through monthly EMIs for up to 20 years.
Can I apply for a loan against a co-owned property?
Yes, with consent from all co-owners, you can apply for a loan against a co-owned property.
16 December 2024
5 mins read
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