A Comprehensive Guide to Tangible Collateral Security

Tangible Collateral Security
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While planning for overseas education, arranging finances is the most significant challenge, and education loans play an important role. Many students turn to education loans to fulfil their dreams of studying abroad. To ensure a smooth and secure loan application process, understanding tangible collateral security is essential. In this blog, we will be discussing tangible collateral security in detail.

Understanding Tangible Collateral Security

The borrower pledges some physical assets to the lender to secure an education loan. Tangible collateral security is that physical asset helping the borrower secure an education loan. The tangible collateral security acts as a guarantee for the lender, the document of which needs to be submitted to the lender. The asset is used at the time when the borrower fails to repay the amount of the loan after a certain period. It plays a crucial role in the education loan process for students planning their finances to study abroad. There are several types of collateral security. Let’s discuss the types of tangible collateral security in detail.

Also Read: Getting a balance transfer on an education loan? Check here to know how to apply for education loan refinance

Types of Tangible Collateral Security

There are several types of collateral security. Let’s discuss the types of tangible collateral security in detail.

Real Estate Property

The value of the loan depends upon the value and type of the property, a borrower is going to pledge. Any home, land, plot, or agricultural land can be used as a tangible collateral security by the borrower only if he is the owner. The owner of the real estate property to be pledged should be either an applicant or co-applicant in the education loan process. Some lenders consider rental income from property as a supplementary source of repayment.

Fixed Deposits and Savings

There is an option for the borrower to pledge a certain amount of fixed deposits or bank savings. The fixed deposits and savings can be used as tangible collateral security. In case of repayment failure of the loan, the ownership of fixed deposits and savings got transferred to the lender. The National Savings Certificates or government-backed savings certificates can also be used as tangible collateral security.

Life Insurance Policies

The applicant can also use life insurance policies as a tangible collateral security to avail an education loan. The LIC life insurance policies provide security in case of unforeseen circumstances. The acceptability of a life insurance policy depends upon its maturity amount and surrender value. Always check the acceptability of the policy in advance. Some of the lenders might not accept the life insurance policy. The surrender value or the maturity amount of endowment policies can be utilised as collateral.

Gold and Precious Metals

Gold and precious metals are also used as tangible collateral security. Some of the lenders accept gold jewellery. But be sure to check the acceptability with your lender in advance. The amount of the loan may vary as per the purity and weight of the gold or precious mortgaged to avail an education loan. Physical gold in the form of coins and bars is also acceptable by some lenders. Try to crosscheck the same with your lender in advance for a hassle-free education loan application process.

Also Read: Confused about the banks for loan refinance? Read this blog and check some of the best banks for education loan refinance

Tips for Utilising Tangible Collateral Security

While applying for an education loan, it is one of the crucial things to understand the utilisation of tangible collateral security. Check out some of the tips to utilise tangible collateral security to its fullest. These tips will help you to avail the complete benefit of an education loan. 

  • Complete the documents related to the collateral security and they should be up to date. Remember documentation is the key. The proof of ownership and value of the collateral should be clear and concise.
  • The loan-to-value ratios may vary per the lender’s terms and conditions. It helps in determining the percentage of the collateral’s value that can be used to secure the loan.
  • Try to determine the fair market value of the collateral.
  • Timely repayment of the loan is crucial to avoid the risk of losing the collateral.


What is the significance of collateral in the education loan?

Collateral acts as a guarantee for the lender, ensuring a form of security in case the borrower cannot repay the loan. It allows students to access larger loan amounts and better loan terms.

Can I use my parent’s property to apply for an education loan?

Indeed, you can use your parent’s property to apply for an education loan. In this case, the parent must become a co-applicant in the education loan process.

Can I use my car to apply for an education loan?

Generally, lender prefers tangible assets like property, gold, or fixed deposits. The assets accepted vary according to the terms and conditions of the loan.

What happens in case the value of the collateral decreases during the loan tenure?

In case the value of the collateral decreases during the loan tenure, it may impact the loan-to-value ratio. Some lenders provide the opportunity to re-evaluate the collateral’s value, while others may require additional collateral or repayment adjustments.

What are the common types of tangible collateral security?

The common types of tangible collateral security include real estate property, fixed deposits and savings, life insurance policies, and gold and precious metals.

Hope you found our blog on tangible collateral security informative and helpful. Simplify your study abroad finances. Dial 1800572126 for expert guidance on loans, student bank accounts, forex, and international money transfers.

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About Farina Khan

Farina Khan is a journalist by profession and a writer by passion. She carries over a decade of experience in Journalism and Mass Communication and worked with some renowned media organisations like Doordarshan and Zee Media. She performed numerous roles during her work tenure including reporting, anchoring, and heading output as well. Her passion for writing, combined with dedication in delivering high-quality content, drives her to excel in the dynamic field of content writing. From thought-provoking articles to SEO-friendly blog posts, or engaging website content, She is here to bring the ideas to life through words.

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