Study Abroad Loans: Types of Collateral Security Required for Education Loans

Study Abroad Loans: Types of Collateral Security Required for Education Loans

Study abroad students often opt for education loans to meet the cost of studying and the cost of living in foreign lands. In recent years, student loans have become a viable option to bridge the financial gap for Indian students going abroad. 

Procuring an education loan for pursuing higher education is very accessible in India. To obtain this financial assistance, a student needs to pay collateral security against loans of higher amounts. Providing collateral servers as security for lenders. Some of the most commonly accepted collaterals are property, third-party guarantors, and fixed deposits (FDs).

Additionally, lenders also accept mutual funds and Life Insurance Corporation (LIC) policies as collaterals. However, all policies and mutual funds do not qualify as a security, as collaterals depend on the terms and conditions of loan providers. 

TYPES OF Collaterals Required For Education Loans

Since the type and worth of collateral are based on the education loan policies of the lender, course duration, and loan amount, each provider accepts different types of collateral. Here are the most accepted financial assets that qualify as collateral security against education loans to study abroad:

Study Abroad Loans: Types of Collateral Security Required for Education Loans
  • Residential, agricultural, and commercial properties: The value of any of these properties must cover the entire loan amount. In addition, it should also meet the loan-to-value ratio as determined by the lender.
  • Fixed Deposits (FDs): In certain cases, lenders also accept FDs against education loans. The value of the pledged FD should cover some percentage of the loan. 
  • Third-Party Guranator: It is one of the most accepted types of collateral security. The guarantor must have a regular source of income and a good CIBIL score or credit history. Moreover, the guarantor must be willing to repay the loan if the student loan borrower defaults.
  • Life Insurance Corporation (LIC) Policies: In some cases, LIC policies also qualify as collateral. Lenders usually use surrender value against the policy as a security. However, students must confirm with lenders if they consider LIC policies or not.
  • Mutual Funds: Furthermore, certain education loan providers in India also offer loans against these financial assets. The value of these funds must meet the guidelines of lenders. 

Stay in touch with Fly Finance News Desk to get the latest updates on study abroad loans and international money transfers. 

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