Higher education, whether local or overseas, is an expensive undertaking and is one that not many can afford out of pocket. As such, a common practice is to opt for a student or education loan to get the required funding. However, over the years, lenders have reduced their education loan portfolio and data suggests that this decrease was last recorded to have dipped by 3.5% in November 2019.
How To Overcome the Student Loan Crisis?
This trend does point in the direction of a student loan crisis as lenders, especially banks, aren’t vying to grow their portfolios as aggressively. Some of the key reasons include an increase in NPAs within the segment and a cut in demand, both of which apply to the education loan.
Naturally, this means it is ■■■■■■ for you as a borrower to access the funds you need. However, an alternative to consider is the education loan on property. Here are all the different ways in which an [education loan] against property can be used to meet this need.
Provides a sizable sanction
With a traditional education loan, you’re generally restricted to a sanction of Rs.20 lakh. This can be quite a limiting factor if the tuition cost is higher and you’re completely reliant on the loan to fund the need. With an education loan on property, the amount you get is based on a percentage of the market value of the asset your pledge.
So, if you pledge a property worth upwards of Rs.60 lakh, you can easily get approved for more than Rs.20 lakh to easily cover costs like course fees, accommodation, travel and supplies such as books, a laptop and specialized software, if needed. Some lenders even offer up to Rs.3.5 crore as a sanction for a loan against property, thus ensuring no limitations with regards to the quantum of funding available to you for education.
Allows you to use the funding freely
With an education loan on property, you have the freedom to use the funding without restriction. This money can be used to pay tuition fees, accommodation costs, travel costs and any other expenses related to the undertaking. Such a privilege isn’t available to you with a traditional student or education loan as the sanction is directly disbursed to the institute you’re enrolling with. As such, it can be inconvenient if you need the funds for other important expenses incurred during the course, which you’ll have to pay for out of pocket.
Gives you the option to pick a flexible tenure
Repayment is a big part of the entire experience and is something that you should account for before you borrow. When you opt for a traditional education loan, the student bears the responsibility of repayment. Here, the student is allowed a grace period, sometimes up to 1 year, before they must repay the loan.
Typically, the tenure lasts up to 10 years from completion and this is quite a short period of time to repay a sizable amount. As a result, the EMI burden is higher and can impact the student’s ability to generate wealth for several years. On the other hand, with an education loan on property, you can opt for a tenure lasting up to 20 years and this is ample time to pay the dues comfortably.
Grants easy access to funding
When it comes to an education loan, eligibility terms can be quite a hassle to get through. Lenders assess applicants based on merit and this can be a long-winding procedure. However, with an education loan on property, you may be required to meet simple and relaxed criteria. Simpler terms reduce processing time and help you to get the funding without much effort.
With lenders tightening lending protocols when it comes to an education loan and the tedious nature of the [education loan eligibility] terms, an education loan on property can be the better option. This is especially true if you’re looking to access funding in a quicker, hassle-free manner.
Conclusion
Moreover, when applying for an education loan for abroad studies, there are high chances that you may need more than Rs.4 lakh (which in some cases is the upper limit for an unsecured loan), which means you’ll be required to pledge an asset anyway. If that’s the case, you may be better off picking the simpler, time-efficient alternative to make your experience a breeze to get through. Ultimately, weigh your options and pick one that offers the most value long-term.
