Clarity on the Pledged Types of Collateral Security for a Foreign Education Loan

One of the best sources of financial aid for most Indian students who wish to study abroad is an education loan from any of the government banks in India borrowed against the property. An asset or property offered against a loan is called as a collateral which acts as a security to the bank. For mortgages and other secured loans, financial institutions require collateral for foreclosure, non-recourse loans, and repossession to make sure to recover the loan amount if the borrower stops making payments.

However, due to two factors many students often find it difficult to get their overseas education loan in time who apply from government bank. They are;

• The processing time being slow for loan against property
• Inadequate understanding about the collateral security that can be pledged

This article will target the 2^nd point and give clarity on the types of collateral security that can be pledged for study abroad loan.

After considering the value of collateral security pledged by borrowers most government banks in India calculate the final secured education loan amount which shows that the collateral security forms the very common requirements of study abroad loan process from any government bank. Read on to know the different types of collateral securities.

Types of Collateral Securities Pledged:

Immovable property and liquid security are the two major forms of collateral security accepted by the Indian Government Banks.

• Immovable Property: – house, flat, commercial land, a plot, shop
• Liquid Security: – fixed deposit, a life insurance policy purchased from any approved government provider, government bonds, etc.

Now that we have known the types of collaterals that can pledged as security, let us widen our knowledge on the types of properties which is acceptable by the Indian Government Banks.

Types of Immovable Properties

Although, immovable property is a widely accepted category of collateral security in government banks, borrowers cannot just pledge any property to avail education loan for abroad studies.  Regarding what types of immovable properties are acceptable the banks have set certain mandates. The examples of accepted collateral properties by the government banks are as follows.

1. Urban Property within City Limits
   • Mahanagar Palika Properties
   • Nagar Palika Properties
   • Nagar Parishad Properties
   • Nagar Nigam Properties
   • District or Taluka Level Properties
2. Improvement Trust Property with or without Lease
3. Nazul Property with Lease
4. Mhada Property
5. Gift Deed Property
6. Grand Parents’ Property /Inherited Property
7. House:
   • Residential Properties
   • Only Urban Properties – Houses which fall under the Municipal limits or is approved by the City Improvement/ Development Trust or Authority
8. Apartments
9. Open lands:
   • Only commercial lands are accepted with a clear demarcation to define the boundaries
   • Under any circumstances agricultural lands are not acceptable
   • Some of the rural properties are also accepted by banks, if the nearest branch of Nationalized bank is authorized to sanction the loan
10. Commercial properties:
    • Shops
    • Industrial Lands *Both the above is accepted, provided no residential property falls within the commercial area
    Not Accepted Types of Collateral Security
    • Grampanchayat /Gramin Rural Property
    • Agricultural Land
    • Open Plot (Without Any Construction)
    Important things to note here:
    While applying for a secure loan with collateral it is vital to know that all the banks have different margins set for loan disbursement. 100% funding is generally not provided, and the tenure of the loan is for a minimum of 15 years.
    In order to have a hassle-free education loan process, knowing the different property-related documents which students have to submit another important aspect of the secured education loan process which can be helpful to borrowers. You can keep following our page to gain information on the documents in the upcoming articles.
    As far as the above-mentioned collateral property information is concerned, it is just an overview. You can get in touch with E’LAN to know more about the same and get complete guidance and assistance for the entire overseas education loan process.
    Thank You!