Education loan against mutual funds is a type of secured loan. In today’s globalised world, pursuing higher education abroad is a dream for many Indian students and it is not very difficult due to the availability of various loans. The universities in the United States, United Kingdom, Canada, Australia, and other countries are costly, so many students prefer to take education loans.
In the secured loans category, one increasingly popular method to fund overseas studies is to pledge mutual funds for education loans just like an education loan against fixed deposits. You can get education loans against mutual funds from any public or private bank in India or any NBFCs. Check here all the major details about it.
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Education Loans Against Mutual Funds
An education loan against mutual funds is a type of loan where students or their guardians can use their mutual fund investments as collateral. This method provides an alternative to general education loans and offers several benefits like lower interest rates and the ability to leverage existing financial assets without liquidating them. Check some of the major benefits below:
| Particulars | Details |
| Interest Rates | Education loans against mutual funds often come with lower interest rates compared to unsecured education loans. |
| Retention of Investments | By pledging mutual funds as collateral, the borrower can retain ownership of their investments. |
| Flexible Repayment Options | Lenders typically offer flexible repayment options, including moratorium periods where the borrower does not need to make any repayments until after the course completion. |
| Quick Processing | Since the loan is secured by mutual funds, the approval and disbursement process can be quicker compared to unsecured loans. |
Approval Process
The approval process for an education loan against mutual funds begins with the borrower applying to the lender and providing details about the mutual fund holdings. The lender then assesses the value of the mutual funds and verifies ownership. If the mutual funds meet the lender’s criteria, the loan amount as per the value of the mutual fund will be determined. Check more details below:
- The first step is to evaluate the value of your mutual fund investments. Lenders usually consider the current net asset value (NAV) of the funds.
- Based on the assessed value, the lender sanctions a loan amount, usually up to 50-80% of the NAV of the pledged mutual funds.
- The mutual funds are pledged as collateral, and a lien is marked on them. The borrower continues to own the mutual funds, but they cannot be sold or redeemed until the loan is fully repaid.
- The loan amount is disbursed directly to the educational institution or as per the borrower’s requirements.
Also Read: Check out some compelling reasons why you should consider the Central Bank of Germany for opening an international student account.
Eligibility Criteria
To be eligible for a loan against mutual funds, applicants need to meet certain eligibility criteria. The students must be the primary account holders of the mutual fund units they wish to pledge. The mutual funds should be in dematerialised (demat) form and registered with recognised depositories. Check the major eligibility criteria below:
- Banks or lenders usually require a minimum value of mutual fund holdings, which varies by institution.
- The applicant should be an adult Indian resident and must have a satisfactory credit score and a stable financial profile.
- Some lenders may also consider the type and performance of the mutual funds as part of their eligibility criteria.
Documents Required
Documentation is the major stage of any type of loan processing. The bank verifies all the details provided by you based on the supporting documents. Check the list of documents required for an education loan against mutual funds below:
- Identity and address proof (UID, Driving License etc)
- Admission confirmation letter from a recognised foreign university.
- Statement of mutual fund holdings.
- Salary slips, bank statements, or income tax returns of the co-borrower (if required).
These are some of the major details and features of education loans against mutual funds. Check some common FAQs based on the same below:
Also Read: Want a secured education loan from a government bank? Check here all about SBI Education Loan against FD
FAQs
An education loan against mutual funds is a secured loan where students or their guardians use their mutual fund investments as collateral to secure funds for higher education.
The benefits include lower interest rates compared to unsecured education loans, retention of ownership of mutual funds, flexible repayment options, and quicker loan processing.
The process starts with the borrower applying to the lender with details about their mutual fund holdings. The lender evaluates the current net asset value (NAV) of the funds and sanctions a loan amount of up to 50-80% of the NAV.
Applicants must be the primary account holders of the mutual fund units, which should be in dematerialised form and registered with recognised depositories.
Required documents include identity and address proof, an admission confirmation letter from a recognised foreign university, a statement of mutual fund holdings, salary slips, a bank statement etc.
No, the mutual funds pledged as collateral cannot be sold or redeemed until the loan is fully repaid.
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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