With more than 1.6 billion learners having been affected due to the pandemic, a sense of uncertainty and incertitude has been accustomed within the minds of people. The future of students has been kept on hold, with the financial sector facing a decline of 17.3%. Due to a reduction in finances, the scope of a parent to see his/ her child fetching for higher studies is bleak and hapless.
Be it within the country or abroad, the prospect of paying for his/ her child’s fee is a factor of stress for many. To turn dreams into reality, Loan Against Property/ Education Loan is vouched upon. You may wonder, what is the comparison between the two?
A Loan Against Property is a loan that is paid against the mortgaged property. The property can either be a flat, a house or just a piece of land. The loan amount depends on the market value. Comparison between the two,
- Provides a higher loan amount: For instance, Bajaj Finserv provides a Loan Against Property for Salaried individuals, up to INR 1 Crore and Self-employed individuals for up to INR 3.5 Crore.
- Longer tenure: In comparison to Education Loan, a Loan Against Property lasts up to 20 years. But, an Education Loan ranges from 5-7 years. The longer tenure lowers the rate of EMI, an added benefit. For instance, Bajaj Finserv provides a tenure, ranging from 2-20 years for Salaried individuals and 18 years for self-employed individuals.
- Educational Loans are higher in terms of demand and disbursal. Education Loans are unsecured. This means that they do not have the concept of pledging any asset as collateral. But, Education Loans up to INR 7.5 Lakh and above may require collateral. For the disbursal amount, there is a range from INR 20-25 Lakhs. However, Education Loans provide a shorter period for repayment, as compared to Loan Against Property.
Note: Shorter tenure for repayment gives way to a higher EMI, giving way to an added factor of pressure and affecting your personal financial goals to a later period.
While both the instruments of finance have their own benefits, the choice to choose between the two is yours. Loan Against property provides a longer tenure, whereas Education Loan is a measure for those who do not wish to pledge their property as collateral.
Generally, for Education Loans, the loan officer takes the income of the parents and students into consideration, while calculating the Fixed Income Obligation Ratio (FOIR). An Education Loan falls under the priority list, totalling it to 40% of the loan amount. In the case of Loan Against Property, the interest needs to be given, as soon as the loan is withdrawn.
Banks providing Loan Against Property,
Banks providing Loan Against Property,
|Banks||Rates of Interest||Processing Fee|
|PNB Housing Finance||9.80%||1.00%|
|Karur Vysya Bank||12.15%||0.50%|
|LIC Housing Finance||11.30%||0.25%|
|Central Bank of India||11.10%||0.50%|
Eligibility criteria for Loan Against Property:
- Minimum age: 21 years; Maximum age: Up to 65 years
- Tenure: Up to 15 years (age being a dependant factor)
- Net Monthly Income: For Salaried individuals – INR 40, 000; For Self-employed individuals – INR 3 Lakh per annum
- CIBIL score: 650 and above
- LTV Ratio: 60% – 70%
Banks providing Education Loan,
|Banks||Rates in India||Rates abroad|
|Bank of Baroda||8.40%||9.15%|
|Central Bank of India||10.10%||10.00%|
|Karur Vysya Bank||11.35%||11.35%|
Eligibility criteria for Education Loan:
- Age: Non-employed individuals – Up to 35 years; Employed individuals – Up to 45 years
- A resident of India having admission to professional/ technical courses
- Students planning to go abroad for further studies
- Permanent employees, employed for more than 3 years, seeking admission in a reputed institution
- Loan amount: Up to INR 10 Lakh for higher studies in India, with a margin of 5%; Up to INR 20 Lakh for further studies abroad, with a margin of 15%
- Costs owing to the admission fee, books, stationary, airfare, purchasing a laptop, boarding & lodging expenses, insurance premium and others under thesis report – are funded by the bank.
- The co-borrower can be a parent/ guardian/ husband or in-laws (if you are married), with a loan provision of INR 4 Lakh; In case the co-borrowers need to be third-party guarantees, they have a loan provision of INR 4 Lakh – INR 7.5 Lakh; Above INR 7.5 Lakh for the co-borrowers with tangible security.
- Repayment tenure: 7-15 years
Tip: Loan Against Property is best for child education. Choose wisely and as per your requirements.