Decoding Education Loan Against Property

Getting into your dream college is not easy. In addition to cracking the entrance exams, you also need to arrange for finances to support your higher education. Over time, education inflation has made this basic right to education a huge financial burden. Though you may have saved a significant amount to support your child’s education, but is it able to beat the inflation and cover all the costs? Well, if not, you don’t need to worry. You can avail an education loan against your property to cover all costs related to your child’s education.
 
You can use this loan amount to cover the cost of flight tickets, admission fees, tuition fees, mess fees, hostel fees, costs of books and other stationaries. It offers you complete flexibility of end-use without any restriction.
 
Read on to know more about education loan against property.
 

What are the benefits of an Education Loan Mortgage?

 

1. Substantial funding

   Mortgage loans can be extremely beneficial if your child wishes to pursue MBBS, Engineering or MBA at prestigious institutions in India or abroad. These courses can cost up to Rs 50,00,000, or even more. In addition to paying college fees, you will need money to cover accommodation expenses, travel expenses, food, and tuition.

1. A mortgage loan provides funds up to a loan-to-value ratio of 75%. It means that if the market value of the property you are mortgaging is Rs 80,00,000, you can easily secure Rs 60,00,000, which is enough to fund education.
    

1. Affordable Interest Rate

   Mortgage loans usually have lower interest rates than other types of unsecured financing. The reason is the backing of valuable property. When the lender auctions off your property in the event of default, they may be able to realise a value greater than the outstanding balance due to the appreciation in the real estate's value over time.
    

1. Flexible Usage

   A loan against property offers flexibility to use the funds. Your lender never asks to provide reasons for submitting a loan application with them. It is useful if your child becomes ill while studying abroad and seeks immediate medical attention. A mortgage loan can assist you in meeting your treatment costs. You can also use the money to book your own flight tickets from India to the country where your child is studying.
    

1. Flexible Tenure

   The EMI, repayment term, and interest payable are all linked. This loan is typically available for a maximum of 10 years. However, the lender allows you to select the desired tenure using the loan against the property EMI calculator. Let's look at why this is important when applying for a loan.
    

Parameters	Repayment Period
	1-Year	3-Year	5-Years	7-Year	10-Year
Loan Amount	Rs 60,00,000	Rs 60,00,000	Rs 60,00,000	Rs 60,00,000	Rs 60,00,000
Interest Rate	10%	10%	10%	10%	10%
EMAIL	Rs 5,27,495	Rs 1,93,603	Rs 1,27,482	Rs 99,607	Rs 79,290
Interest Payable	Rs 3,29,944	Rs 9,69,712	Rs 16,48,936	Rs 23,66,997	Rs 35,14,853
Total Payable	Rs 63,29,944	Rs 69,69,712	Rs 76,48,936	Rs 83,66,997	Rs 95,14,853

 
You have two choices: make your EMI more affordable by extending the tenure or save money on interest payments by choosing a shorter tenure. So, whatever you decide, make sure your budget allows for it.
 
Also Read: Mortgage Loan Interest Rate: Everything You Want to Know
 

Key considerations before taking out an Education loan against property

 

• Property type

  Not every real estate property is mortgage-worthy. The lender may refuse to approve an education loan on agricultural land or property that has not been approved by the city's development society.
   

• Property condition

  If the property you want to mortgage has multiple leaks, broken walls, or was built more than a half-century ago, then the lender may reject your loan application against this property as mortgage,  it may not be approved for a loan.
   

• Not suited for each course

  You should only consider a mortgage education loan if the course you want to enrol in requires significant funding. Applying for a mortgage makes no sense if you want to pursue courses like B.Com, B.SC, or technical certification like PGDCA.
   

• Property at risk

  Make sure you have a solid repayment plan when applying for an education mortgage loan. Always keep in mind that if you miss an EMI regularly, the lender has the authority to auction off your property to recoup its losses.
   

How to apply for an education loan against property?

 

Step 1

Choose a lender. Before deciding on a financial institution, compare their rates and offers, as well as their eligibility criteria, which are available on their official website.
 

Step 2

Choose an application mode. Financial institutions allow you to apply online through their website or in person at their branch office for offline submission.
 

Step 3

Fill out the form. Share your basic information like name, address, contact number, employment status, and income. Furnish documents supporting your credentials. 
 

Step 4

The lender verifies your basic information in the first step. And in the later stage, they will conduct a physical inspection of the property in question. 
 

Step 5

If the lender is satisfied with the condition of the property and is confident that the likelihood of default with your profile is low, you will be easily approved for an education loan against the property.
 

What are the alternatives to an education loan against property?

 
Education mortgage loans are ideal for higher-cost courses such as MBBS or MBA. However, for other courses with low tuition fees, you can apply for a personal loan for education purposes. Like a mortgage loan, this loan product also comes with flexible tenure and usage. However, the maximum repayment term is limited to 60 months, with a funding limit of Rs 500,000.
 
Also Read: 3 Strategies to Help You Pay Off Your Mortgage More Quickly
 

Final Words

 
The best way to fund your child's higher education is through an education loan against property. It is available for longer terms of up to ten years, and the interest rates are also lower than those of other financing products on the market. Furthermore, you can use the funding to pay your child's college fees while also using it for other commercial or household purposes.