Education Loan Against Securities: Best Banks, Features, Benefits

Education Loan Against Securities
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Pursuing higher education abroad is a dream for many Indian students. However, the financial burden associated with international education can be very expensive for certain countries like the USA, the UK etc. Not every student can get an education loan by pleading a collateral to the bank. This is where an education loan against securities can play an important role in fulfilling your dream of studying abroad. Check all the major details about education loans against securities, eligibility criteria, application process and other factors.

What is an Education Loan Against Securities?

An education loan against securities is a type of loan where students or their parents can pledge financial assets, such as shares, bonds, mutual funds, fixed deposits, or other securities, as collateral to secure a loan. Loan against fixed deposit is one of the most common methods these days. This form of financing is particularly beneficial for those who have substantial investments and want to leverage them to fund their education abroad without liquidating their assets.

Loans against securities have multiple categories under which you can apply for the loan. Some of the common securities are mutual funds, loans against sovereign gold bonds, loans against time deposits, loans against insurance policies, loans against NSC/KVP etc.

Also Read: Finding ways to fund your education abroad? Check here for ways to fund higher education other than fixed deposits

Best Banks and NBFCs for Loan Against Securities

In India, there are a lot of banks and NBFCs that offer loans against securities. Most of the lenders have common eligibility criteria and other terms and conditions. Check details and major features of some of the best banks for loans against securities below:

Banks and NBFCsMajor Features
State Bank of India (SBI)– Multiple securities are accepted
– Low Margin Money
– Processing charges starting at 0.50% of the loan amount
ICICI Bank– Interest rates starting at 11.50% per annum
– Processing charges will be only up to 2% of the sanctioned loan amount
– Demat Shares and ETF (Exchange Traded Funds) are also accepted as securities
HDFC Bank– Loan up to 50% of the present value of the Shares
– For Debt Mutual Funds/ FMPs, you can loan up to 80% of the NAV (Net Asset Value)
Bajaj Finserv– Pre-assigned loan limit of up to INR 5 crore
– Over 1100 approved sharesRepayment period of up to 36 months
Yes Bank– No extra charge on foreclosing of loan
– A wide variety of securities are accepted from mutual funds to life insurance policies
– Loan up to 92% of security value

Benefits of Education Loan Against Securities

An education loan against securities offers several benefits like providing access to funds for higher education without liquidating investments. This type of loan allows borrowers to leverage their existing securities, such as stocks, bonds, or mutual funds, as collateral so that they retain ownership and continue to earn returns on these assets. Check some of the major benefits below:

  • Since the loan is backed by collateral, lenders perceive it as less risky. This results in lower interest rates compared to unsecured loans.
  • The value of the pledged securities can influence the loan amount. This allows students to secure a larger loan.
  • Borrowers often benefit from flexible repayment terms like moratorium periods where repayment can start after completing the course.
  • Pledging securities means the assets remain intact which allows the students to potentially appreciate over time.
  • Under Section 80E of the Income Tax Act, the interest paid on an education loan can be claimed as a deduction.

How to Apply for an Education Loan Against Securities

Before applying for an education loan against securities, you must do comprehensive research to find the best loan scheme for you and the best bank or NBFC. You also need to determine the total financial requirement for studying abroad like the tuition fees, accommodation, travel, and other related expenses. Check the steps to apply for a loan against securities below:

  • Identify the securities that can be pledged as collateral. Ensure that these investments align with the lender’s accepted collateral list.
  • Fill out the loan application form and submit it along with the necessary documents, such as proof of admission, identification, and details of the securities.
  • Once the loan is approved, the lender will disburse the loan amount as per the agreed terms. 
  • The pledged securities will be held as collateral until the loan is fully repaid.

Important Guidelines for Loan Against Securities

While it is a very easy and quick way to get an education loan against securities, you must consider carefully all the factors before applying for the loan. Check some important guidelines for loans against securities below:

  • The value of securities can fluctuate based on market conditions. Ensure that the pledged assets have sufficient value to cover the loan amount, even during market volatility.
  • Understand the lender’s loan-to-value (LTV) ratio, which determines the maximum loan amount as a percentage of the value of the pledged securities.
  • Choose between fixed or floating interest rates based on your financial stability and risk appetite.
  • Check for any prepayment penalties if you plan to repay the loan before the stipulated tenure. Usually, most banks and NBFCs do not charge any prepayment penalty for loans against securities

Also Read: Looking for a loan against securities from SBI? Check here all about SBI loan against FD

An education loan against securities is an effective financial tool for Indian students aspiring to study abroad. It offers a balance between maintaining existing investments and meeting educational expenses. However, always do comprehensive research and find out the best offer for you by comparing interest rates, processing fees, margin money etc of different lenders. Check some of the FAQs based on the same below:

FAQs

What is an Education Loan Against Securities?

An education loan against securities is a type of loan where students or their parents can pledge financial assets such as shares, bonds, mutual funds, fixed deposits, or other securities as collateral to secure a loan.

What are the benefits of taking an education loan against securities?

The benefits of taking an education loan against securities include lower interest rates compared to unsecured loans due to the collateral, the ability to secure a larger loan amount based on the value of the pledged securities, and flexible repayment terms often including moratorium periods where repayment can start after completing the course.

Which banks and NBFCs in India offer education loans against securities?

Several banks and NBFCs in India offer education loans against securities. Some of the top banks are the State Bank of India (SBI), ICICI Bank, HDFC Bank, Bajaj Finserv etc.

How to apply for an education loan against securities?

To apply for an education loan against securities, you must fill out the loan application form and submit it along with necessary documents such as proof of admission, identification, and details of the securities.

What is the interest rate for loans against securities?

The interest rate applicable for a loan against securities varies among the lenders and the type of security offered. On average, the interest rate varies between 10% to 16% per annum.

To know more about education loans, 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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