How to Convert Secured Loans to Unsecured Loans?

Convert Secured Loans to Unsecured Loans
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Most of the banks in India, especially the government banks, ask for some kind of collateral while approving study abroad education loans above 4 lakhs INR. In case of the nonpayment of an education loan, the bank has a legal obligation to recover the loan amount by selling the collateral. This increases the risk of loss of collateral for the borrower in case he/she makes a loan default.

Moreover, you cannot sell the asset which you have mortgaged in the bank during the repayment period or before closing the loan. So what is the solution for this? Here is the answer. Education Loan Refinance or loan transfer is a financial tool through which you can get your collateral freed anytime during the repayment period. Let’s check the process and features of loan refinancing. 

Process of Education Loan Refinance

Aman has taken a secured education loan of INR 12 lakhs at a fluctuating interest rate which is currently 14%. After 4 months, the interest rate increased by 1% and the overall cost of the loan went high. He got an offer from another bank who were ready to approve a loan takeover without collateral and the interest rate was 12% (fixed rate). He applied for education loan refinancing which helped him to save money on the interest. In the refinancing process, the new bank makes the payment to the existing bank to foreclose the loan. Aman will now pay the EMIs to the new bank. From this example, you can understand how education loan refinancing helps you to save money and to free your asset which was kept as collateral.

Also Read: Early Repayment Charges on Education Loan

Top Banks in India Providing Unsecured Education Loan Refinance 

You must understand certain things to keep in mind after taking an education loan. Keep checking regularly the interest rate of different banks before making the decision. There are many banks in India that offer balance transfer or loan refinancing schemes. Some of the major banks offering dedicated schemes for education loan refinancing are State Bank of India, IDFC First Bank, HDFC Bank etc. Let’s check the details of each bank offering loan refinance. 

ICICI Bank Education Loan Transfer 

ICICI Bank is one of the most preferred choices for study abroad loans and loan takeover. The bank provides study abroad education loans of up to INR 1 crore with a maximum repayment period of 15 years. You can get collateral free loan refinance of up to INR 40 lakhs. Check some of the major features of ICICI Bank Education Loan below:

  • After the loan transfer, you can also take an education loan top-up as per your requirement.
  • In the Axis Bank loan transfer, you will get the cover for all the outstanding limits sanctioned as Top Up Loan (if any) and the foreclosure charges.
  • The EMI payments can be made through various payment modes like Net Banking, Mobile Banking, Cheques, ACH etc.

Did you know you can get tax exemption on education loans? Check out this blog on Tax Exemption on Education Loan

IDFC First Bank Education Loan Transfer

IDFC First Bank offers education loan transfer at up to 1% less interest rate than the existing. It offers collateral free education loan transfer of up to INR 50 lakhs. If you want to take more amount then the bank offers a loan up to INR 1 crore with collateral. The application process for IDFC Education Loan Transfer is completely online. 

  • You need to withdraw all the documents from the existing lender and submit the same to IDFC First Bank.
  • After submitting the application form and document, the bank will start the process of loan transfer.
  • If you need an extended loan or loan top up, you can get the same from IDFC First Bank after refinancing your ongoing education loan subject to terms and conditions.  

HDFC Education Loan Transfer 

HDFC is a leading private bank in India with a strong track record in providing education loan and loan transfer services. You can transfer your existing education loan to HDFC bank easily and get a low rate of interest rate. The bank will not charge any processing fee for balance transfer on education loan and you may also get a fixed rate of interest that will be lower than existing. 

  • You can get up to INR 7.5 lakh without any type of collateral
  • The bank will pay the amount to the existing bank for all the outstanding amount, charges and penalties (if any) and foreclosure charges.
  • You need to get a No Objection Certificate/NOC from the existing lender to start the education loan refinance process.

Note: Please be informed that the amount, interest rate and the terms can change depending on the guidelines of Reserve Bank of India (RBI). Please check all the terms and conditions mentioned in the loan agreement while applying for an education loan.

Important Guidelines Regarding Education Loan Transfer

Education loan transfer is a useful financial tool that will help you to secure a cheaper rate of interest on your ongoing education loans. You can also get your collateral freed and can get back its access and ownership through unsecured loan refinance. However, you must keep in mind the below mentioned suggestions:

  • Unsecured loans are comparatively costlier than secured loans due to high interest rates.
  • A secured loan is likely to be approved quickly as compared to an unsecured loan. 
  • Always check the entire terms and conditions laid by the bank before applying for the loan refinance
  • Always try to get a fixed rate of interest on your education loan refinance.
  • Mostly, you can transfer or refinance your education loan only once. So, do your research properly and compare the features of different banks before finalizing the loan refinance. 

FAQs on How to Convert Secured Loans to Unsecured Loans

How can I get an education loan refinanced without collateral?

A lot of public sector banks, private banks and NBFCs offer education loan transfer without collateral. IDFC First Bank, ICICI Bank, HDFC Bank etc are some major banks providing large amounts without collateral for education loan balance transfer. 

What is the interest rate for loan transfer?

Interest rate will vary depending on the banks and the category i.e. fixed interest rate or fluctuating rate. The average rate of interest on education loan balance transfer is 10-14%. You can also get lower than the said rate subject to terms and conditions.

How to apply for an Education loan transfer?

After approval, you will be required to contact your existing lender to get all the documents back and a no-objection letter. Submit the documents in the new bank and wait for disbursement. 

What is the difference between loan transfer and loan refinancing?

There is no difference between loan transfer and loan refinancing. Balance transfer, loan transfer and refinancing have the same meaning. 

Check all the terms and conditions before applying for an education loan refinance. Try to secure a low and fixed rate of interest with a sufficient repayment period. To know more about loan refinancing, loan application process, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience. 

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About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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