These days, students take pride in financing their overseas education independently without depending on anyone by opting for student loans. When you choose to fund your education by opting for an education loan, you must first decide whether you want to select a secured or unsecured loan. And if you plan to take a secured loan, collateral is involved. So, let’s find answers to questions about secured & unsecured loans, collateral & its types and more.

Key Highlights

• Types of loans for students?
  • Secured loan
  • Unsecured loan
• What is collateral?
• Types of collateral security for education loan
  • Tangible and immovable collateral
  • Intangible or liquid assets
• FAQs

Types of loans for students?
Before diving into the types of collateral, let’s first understand which types of student loans are available.

1. Secured loan
   In this type of student loan, you need to offer collateral. This collateral could be the asset you will pledge as a guarantee to your lender. This will act as a security against your education loan.
2. Unsecured loan
   If you don’t want to offer any asset as collateral, you can opt for this loan as you don’t have to pledge any asset in this type of student loan. In this case, the lender will focus on the employability potential of the student, credit score, and other parameters.
   

What is collateral?
When you opt for a secured loan, you have to offer collateral as a guarantee against your study loan, and this collateral can be tangible or intangible. So, now that you know what collateral is let’s understand various types of collateral.

Types of collateral security for education loan
Tangible and immovable collateral

• Residential property: You can offer an apartment or house as collateral. But ensure it meets the documentation requirement of the lender.
• Land: If you offer land as a security, it has to be non-agricultural land with clear boundaries and free of legal disputes.

Intangible or liquid assets

• Fixed deposit (FD): FD by any registered deposit-taking organisation assigned in favour of your lender can be accepted as collateral.
• Government bonds will act as collateral too.

Important note: These are some common types of collateral accepted by most financial institutions. But please remember, each lender will have their pre-set criteria of collateral. So, it is best to check which type of collateral your financier accepts.

FAQs

Why should you take education loans?

Education loan is packed with multiple advantages, such as:

• It preserves your family savings
• Helps you earn a self-made badge
• You can access quality education in your dream study abroad destination and university
• It builds your credit score if you repay your student loan responsibly
• Instils financially prudent habits

Is collateral mandatory for studying abroad?
Most financiers offer both, secured as well as unsecured education loans. It will ultimately be your choice to select either of the two.

What are the 4 most common types of collateral?
An apartment, house, fixed deposit and non-agricultural land are the four most common types of collateral for student loans.

How much collateral is needed to get a student loan to study overseas?
Since it is not mandatory to offer collateral to opt for an education loan to study abroad, you can decide, based on the asset’s availability or non-availability, to pledge it against the student loan. However, the value of the collateral will be determined by the evaluators that represent your lender.  
So, this is what you must know about collateral and its types. Please contact us if you have any queries related to the secured or unsecured loan for education, education loan rate of interest or documentation process.
As a student-centric organisation, we extend multiple benefits to our students, including 100% finance, hyper-personalised education loans, and flexible repayment options. For any assistance, please feel free to connect with us. We will be glad to assist you on your study abroad journey.

Top entrance exams after graduation in India - A brief guide