Let’s solve the secured and unsecured education loan dilemma

Recently, RedSeer, a leading consulting firm, in its Higher Education Abroad report, stated that Indian students will spend $80 billion per annum to study abroad by 2024. Currently, Indian students are spending $28 billion to study abroad. The cost of education is skyrocketing in India too. Hence, millennials opt for an education loan to achieve their academic aspirations.

A student loan is a perfect opportunity to finance your education independently. However, students like you often face the dilemma of whether to choose a secured or unsecured education loan. So let’s understand the difference and other essential elements of secured and unsecured loans for students. This will help you make a prudent choice as per your financial requirements.

So what is a secured and unsecured education loan?

Secured loan

It is a type of loan that requires you to offer collateral. To put it simply, you will have to provide collateral as a guarantee against the education loan. It is super easy to get secured loans as you can apply online from the comfort of your home. 

Unsecured loan

Unsecured loans don’t require you to pledge any security/collateral. So instead of relying on the borrower’s asset security, the financial institution provides the loan based on the borrower’s creditworthiness and a student’s employability potential in case of an education financing solution.

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How to get an unsecured education loan in India?

You need to follow these steps:

·         Research aspects such as education loan rate of interest, benefits offered by the lender, customer ratings, customer service etc., before shortlisting the provider.

·         Fill out an online application form or visit the branch office.

·         Submit the list of documents as required by the lender

·         The loan will be disbursed if you tick all the boxes

What is a Collateral?

Collateral is any asset that you pledge against your education loan. It acts as a guarantee for your student loan. Collateral can be tangible such as an apartment or can be intangible, like fixed deposits. Let’s take a look at types of collateral:

Ø  Tangible/Immovable Property:

·         An independent house, flat, or land

·         Non-agricultural open land with clear defined boundary lines

 

Ø  Intangible/Liquid Securities:

·         Fixed Deposits (FDs)

·         Life insurance and more

The value of the collateral

An education loan provider will determine the value of the collateral before offering you a secured loan. The financial institutions carry out the valuation of the collateral through valuators appointed by them. These internal evaluators examine the collateral thoroughly to ensure that the collateral provides adequate cover against the education loan.

Student Profiling before taking a loan

Your student profile will be evaluated against certain pre-set criteria. Financial institutions will arrive at your employability score based on several elements. Every education loan provider will have its own list of criteria. Let’s understand a few of them:

·         Academic scores: Your academic score will be an important factor to judge your academic performance.

·         Entrance exam scores: Scores of entrance exams like GRE, GMAT, SAT, MCAT, etc., are taken into considerations while evaluating your student profile.

·         Courses and university: Completing your studies from a well-ranked institution will strengthen your professional career and thus, will enable you to achieve a bright future. At Avanse, we finance conventional courses like engineering, IT, science, etc. You will be glad to know like we also fund non-conventional courses like aviation, film-making programs, animation, and more.

·         The study abroad destination: Completing your education from popular destinations like the US, the UK, Canada, Australia, Germany will have more weightage than lesser popular study abroad destinations.

·         Consistency in scores: The financiers will check if you have consistently performed well in your academic life based on mark sheets.

·         Courses aligned to existing skills: Ensure you select a course based on your current skills.

At Avanse, we generate an employability score based on these parameters to evaluate your student profile and create customised solutions for you.

Many students opt for secured loans, and many others opt for unsecured loans based on their needs and requirements. You can decide between the two, depending on your financial needs. Whether you want a secured or unsecured loan, we at Avanse offer all kinds of solutions designed to best suit your needs. As a student-centric education loan provider, we provide customised loans whether you choose to study in India or study abroad.

So, we hope this helps you make a well-informed decision. If you want to know more about loans for students, the application process, education loan rate of interest and the documents required, or if you have any other queries, we will be happy to assist you. https://www.avanse.com/apply-now?source=blog