How to Get a Loan Against Collateral for Education?


  • Want a loan of more than INR 7.5 lakh for education? Tell your parents to submit collateral to get the same
  • Read this post to know the collateral accepted by the lender for granting such a loan amount

Loans above INR 7.5 lakh for education will require collateral, which can be a house property, land, fixed deposit or a life insurance policy. The fund so received can help finance your studies in India or abroad. And the collateral would be free once the payment is done in full. Otherwise, the non-payment of the loan can make the lender seize your collateral. There’s a catch here! This will be treated like a loan against security or assets and not an education loan. Here, the parents will become the borrower, unlike an education loan where students remain the borrower and parents can be taken as co-applicants. Read this post to know how much funds you can get for the studies of your kid by submitting the collateral.

Education Funds against Home

You can borrow a loan of INR 1 Crore and above by mortgaging the house as collateral. And the loan would be processed faster compared to an unsecured loan. Just the paperwork will be more as you need to provide the property documents to the lender to gauge the market price of your house so that they can evaluate the loan limit. The loan tenure can range from 10-15 years in this type of loan arrangement.

How about Getting Funds against a Life Insurance Policy?

Your Life Insurance plan could help you finance higher studies. To mortgage an insurance, you need to assign the policy in favor of the lender until the loan is paid in full. And the good thing is that you can keep paying your insurance premium while it remains with the lender. But before you mortgage the insurance, make sure its value exceeds the borrowed amount. Here, the value will be the surrender value of a life insurance policy. The loan is granted around 70%-80% of the surrender value.

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Education Funds Against Fixed Deposits

A lender may sanction a loan for education if you provide a fixed deposit for its security. But, you can’t borrow above 90% of the FD value from the lender. You don’t need to break the FD if you mortgage it against the loan.

Education Funds Against Land

The value of the land is low compared to a ready-built house but it can still be used as collateral to secure your loan amount. You just have to take care of one thing that it must not be agricultural land, or comes under the Gram Panchayat else the lender won’t grant a loan. You can get the security for your loan amount and borrow above INR 7,50,000 from the bank or NBFC based on your educational requirements.

How Does a Loan Against Collateral for Education Differ from a Normal Education Loan?

The rate of interest on a loan against collateral will be lesser than an unsecured education loan. But the repayment will begin as soon as the loan is disbursed against the collateral as opposed to an education loan where the repayment starts 6-12 months after the course completion.

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