Understanding education loan security is essential for students planning to finance education through secured (with collateral) education loans. Here's what you must know about secured loans and collateral before applying for a student loan, including education loan security requirements, collateral security for education loan types and more.
Key highlights:
- Types of Education Loans
- Education Loan Security Meaning
- Education Loan Security Requirements
- Education Loan Security – Documents
- Some Important Parameters of Student Profile
- Eligibility Criteria for Education Loan
- Application Process for Student Loan
Types of Education Loans
An education loan is a financial product designed to help students achieve their academic aspirations independently, without depending on their parents. It covers the holistic cost of education, including tuition fees, travelling expenses, accommodation costs, living costs, cost of learning devices and other education loan-related expenses. You can repay the student loan in EMIs, which in turn strengthens your creditworthiness.
- Secured Education Loans: These student loans require education loan collateral, i.e., an asset pledged against the education loan as security.
- Unsecured Education Loans: These student loans do not require any security for the education loan.
Please note that most NBFCs offer both. You can choose between the two depending on your financial requirements and preferences.
Also Read: Types of Education Loans Students Must Know
Education Loan Security Meaning
Collateral for an education loan refers to the asset provided to a lender as protection against loan default. Depending on the education loan collateral requirements, it can take the form of collateral (like property or fixed deposits).
Education Loan Security Requirements
Once you have shortlisted your financial institution, check out the types of education loan security your preferred lender accepts to enjoy a seamless education loan journey.
Some collateral includes:
- Residential property (apartment/house)
- Fixed deposit by any registered deposit-taking organisation
Education Loan Security – Documents
Before you apply for a study loan, you need to be ready with documents.
- For students:
- 2 colour passport-sized photos
- Photo ID
- Residence proof
- Date of birth proof
- Signature verification
- Academic documents
- Proof of admission
- Fee structure
- For co-applicant:
- 2 colour passport-sized photos
- Photo ID
- Residence proof
- Date of birth proof
- Signature verification
- Income proof
- Education loan security documents (only for a secured student loan)
- 8-month bank statement
- Relationship proof
Some Important Parameters of Student Profile
Please remember, in addition to the documents required for a student loan, your student profile will be thoroughly checked. The lenders do this to determine your employability potential.
- Academic Performance: Financial institutions review your past academic records to assess your potential and dedication as a student. Strong and consistent marks reduce the perceived risk for the financial institution, as robust academic performance often leads to future career success.
- Entrance Exam Scores: Standardised tests such as the Graduate Record Examination (GRE), Graduate Management Admission Test (GMAT), and English proficiency tests such as the International English Language Testing System (IELTS) or Test of English as a Foreign Language (TOEFL) showcase your academic competence. High scores demonstrate strong foundational skills and competitive readiness, making financial institutions far more confident in your ability to excel in rigorous programmes.
- University Pedigree: The reputation, global ranking, and placement track record of your preferred institution play a massive role in assessment. Tier-1 and premier institutions offer higher job security and attract lucrative starting salaries, which assures lenders that you will comfortably manage study loan repayments. Please check whether your chosen university has a tie-up with your preferred education loan partner for a seamless education loan journey,
- Continuity of Education: Lenders evaluate your educational history to ensure steady progress without unexplained gaps in learning. If gap years exist, provide clear evidence such as work experience, skill certification programmes, or internships which prove your ongoing professional and academic drive.
Eligibility Criteria for Education Loan
- Students can apply if they:
- Are Indian citizens who are 18 or older
- Have a confirmed admission before the final disbursal
- Have a co-borrower who earns in India
- Co-borrowers also need to meet the following criteria:
- Must be an Indian citizen and should be a parent, legal guardian, sibling or other blood relative
- Must have a bank account in India that allows them to sign cheques
- Must be the primary debtor
Also Read: Eligibility Criteria For An Education Loan
Application Process for Student Loan
These days you don’t have to stand in long queues as most financial institutions have moved their application process online. In fact, at Avanse Financial Services, you can apply in 4 easy steps:
- Fill out the online application by visiting the website or visiting the nearest branch office
- Speak to our educational loan consultants
- Send us the requisite documents
- If you tick all the boxes, you will receive the student loan
Learning about collateral security for an education loan is essential to evaluate collateral options. At Avanse Financial Services, we offer an educational loan for abroad studies as well as to study in India. You can try our EMI calculator for an education loan to plan your estimated EMIs. If you have any queries about student loans, education loan interest rates or your academic journey, please connect with us.
