Education loans to study abroad can be availed on a home loan property that has been pledged as collateral for an already existing loan. Aspirants who wish to pursue higher studies abroad can take an education loan on a home loan property of an amount which will be calculated based on the current value of existing collateral and the pending loan. Education loan on a home
Let’s know all about eligibility criteria, how to calculate the education loan amount in such a case, and the benefits of taking an education loan on the property.
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Also Read: Know all about LLB education loans to study abroad and the best public banks, private banks, and NBFCs providing education loans for LLB students.
Can I Take a Study Abroad Education Loan on a Home Loan Property?
Yes. A housing property that is already pledged as collateral against a home loan is eligible to avail of an education loan to study abroad. All financial institutions including public banks, private banks, and NBFCs offer a secured loan on a home loan property.
The amount of loan that will be sanctioned depends on the market value of the home loan property, the balance amount to pay off the loan, and the lender.
Please note that banks do not provide education loans to study abroad on home loan property if it is a personal or business loan on the property mortgaged. Until and unless you do not clear off the loan, the possibility of availing an education loan on home loan property stands no chance.
Eligibility Criteria
An important thing to know about education loans is their eligibility criteria. Every financial institution keeps eligibility criteria to avail education loans. While the criteria generally differ from institution to institution, the basic criteria remain the same. To be eligible for an education loan to study abroad on a home loan property, the applicant must fulfil these requirements-
- An excellent academic record
- High CIBIL score
- Must be an Indian citizen
- Should be above 18 years of age
How do Banks Calculate Education Loan Amount?
By now, this is clear that lenders do provide education loans based on home loan property mortgaged with them. However, education loans on the original value of the property are not provided. The calculation of the education loan amount depends on two major factors- the market value of the housing property mortgaged and the balance amount that has to be paid to clear off the loan.
Let’s consider an example to ascertain the calculation of the total loan amount on the home loan property.
Most lenders use this formula-
Education Loan Amount = Current collateral value- (risk margin x pending loan).
Let’s assume that Ramesh wants an education loan. However, his parents have an outstanding loan amount of INR 15 lakhs secured by the collateral value of INR 60 lakhs. Considering the risk margin set at 1.5 by the lender, the calculated education loan amount would be –
60- (1.5 x 20) = 30 lakhs
This means that the value of the collateral will be considered as INR 30 lakhs and not 60 lakhs. Thus, Ramesh will be entitled to an education loan of 30 lakhs.
Also Read: Check out our blog on one of the most flexible alternatives to finance your study abroad dreams- gold loan for education: benefits, criteria, documents & process.
Benefits of this Loan
Education Loans to study abroad can help students to cover their study-abroad expenses such as tuition fees, accommodation costs, and other related expenses. Here are some of the benefits:
- Lower interest rates- The reason for a lower interest rate on education loans against home loan property is that banks already know you have an existing loan on which the property has been mortgaged. This reduces the risk factor as they already have collateral documents. For some banks, interest rates start from 7-8% p.a.
- Higher loan amount- Since the loan amount is provided on the current market value of the property, applicants are eligible to avail 65-100% of the education loan to study abroad on a home loan property.
- Quick disbursement process- The documentation process of education loan on home loan process is not complicated. Also, the major chunk of formalities are already taken care of during the initial home loan process which allows banks to quickly sanction and disburse the loan.
- Longer repayment tenure- Banks also provide flexibility in repayment schedules along with longer repayment periods. A maximum of 20 years can be availed to repay the education loan on home loan property.
- Tax benefits– Applicants who take education loans on home loan property can avail of income tax rebate on education loan under section 80E. The period for the same is up to 8 years or until the loan amount is repaid, whichever is earlier.
FAQs
Aspiring students who wish to pursue higher studies in India or abroad can take an education loan on a home loan property that is already pledged as collateral against a home loan.
There are several benefits that an applicant can receive on an education loan against home loan property like- lower interest rates, high loan amount, tax benefits under section 80E, longer repayment period, and quick disbursement of loan.
Yes. A housing property that is already pledged as collateral against a home loan is eligible to avail of an education loan to study abroad. All financial institutions including public banks, private banks, and NBFCs offer a secured education loan based on mortgaged property.
Since the loan amount is provided on the current market value of the property, applicants are eligible to avail 65-100% of the loan on a home loan property.
Yes, it is easier to get an education loan on a property that has been mortgaged. This is because it reduces the risk factor as they already have collateral documents.
This was all about whether an applicant could avail of education loans on a home loan property or not. To know about education loans, the 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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