Considering the rising cost of education in Indian and abroad, studying at the top universities is increasingly becoming a challenging situation. As per a study by the Indian Statistical Institute, almost 2.6 Lakh Indian Students are pursuing higher studies abroad in 2019. This number is most likely to surpass 6 Lakh by 2020. Although higher education overseas seems a lucrative proposition, the cost involved is steep.
Now, opting for an education loan against property might seem like an attractive funding option due to a hefty sum involved. However, mortgaging an asset is not sufficient to get your loan application sanctioned with cost-effective terms. Several factors, like credit history, income comes into play in determining how affordable your loan will be.
To experience a smooth approval and disbursal process you need to know these 5 things to know before applying for a loan against property for education:
Factor I: Check Your Credit Score Before Applying
Your credit score is a numerical representation of your creditworthiness and repayment history. This is why; lenders will take your credit rating and history into consideration before sanctioning an education loan for study abroad studies.
Thus, it is essential to build creditworthiness by exhibiting a steady income source and a good CIBIL score of 750 or above. Keep in mind, facing rejection of your loan application brings down your credit score even further.
Factor II: Learn About the Rate of Interest
One of the 5 things you need to do to apply for LAP for education is to check the interest rates, as it determines loan affordability. Thus, to keep your instalments affordable, opt for a nominal interest education loan with zero hidden charges.
Further, understand that lenders provide you with a credit limit based on the asset you pledged. This means you can get a hefty loan sanctioned of up to 70-80% of your collateral’s value. You can pledge a high-value property yet get financing on a lower rate of interest as well.
Factor III: Estimate Your Needs & Plan Your Repayment Before Applying
You should determine the loan amount you need to borrow depending on your financial requirement. Plus, assess your current income alongside the existing EMIs and day-to-day expenditure in deciding whether you can afford an education loan for abroad studies or not.
Apply for an advance only when you see it is economically viable. Repayments can be made without straining your personal finance if you have a stable budget planned.
Factor IV: Choose a Lender After Thorough Comparison
Every financial institution has guidelines based on which it sanctions a property loan for education. You need to check if you qualify the education loan eligibility terms. In addition, for a cost-effective option, you must compare the various offerings.
You can perform this task by using a loan EMI calculator of your preferred lender. While comparing, check for hidden charges involved. Also, read the terms and conditions carefully. This will help you to pick a lender that offers loan against property for education on affordable terms.
It is advisable to select a lender, as it offers secured advances of up to Rs. 3.5 Crore against a competitive rate of interest. Along with it, you enjoy quick approval and fast disbursal within 72 hours and repayment tenor over a maximum of 18-20 years.
Keeping this factor in mind, proceed to check your pre-approved offer for an education loan against property from your preferred lender. They are applicable for business loans, personal loans, home loans, among numerous other financial products. By entering a few necessary details, you can check deals that are customised for you and also enjoy instant, hassle-free loan approval.
Factor V: Keep a Tab on the Tax Benefits
Not many loan seekers are aware of the tax exemptions available on an education loan against property. If the money is utilised as education expenditure, the interest repayment and the associated costs such as documentation charges and processing fees can be claimed under Section 37 (1) of the Income Tax Act. However, borrowers are not allowed to claim tax benefits on the principal repayment of mortgage loan for education.
Additional Read: Loan Against Property Interest Rate
Considering these factors while availing a student loan in India will ensure a quick and hassle-free process. With the large disbursed funds and borrower-friendly repayment tenor, it has become the preferred financial aid to pay for education.