A personal loan for education is a smart way of financing a rewarding academic career. However, when you want to pursue a course in a premium institution, you may need to borrow a high loan amount to cover the costly tuition fees and additional charges. In such cases, you may use a secured education loan. Here you’ll pledge collateral against your loan.
An excellent collateral option for secured education loans is an immovable property that you own. Any residential property is acceptable, whether it is vacant or occupied by you or any tenants.
But what if your property is under a home loan? The good news is that you can still provide it as collateral for an education loan. Read this article to find out how.
Consider your property’s market value
If the market value of your property is high, lenders are more likely to approve your loan. They might also offer you a high loan amount and affordablepersonal loan interest rates.
Home loans typically have a long tenure, and since the property value appreciates over time, so the price of your house is likely to spike. Thus, you can apply for an education loan against the property easily.
Consider your existing loan repayment status
While gauging your suitability as a loan candidate, lenders consider your fixed obligations to income ratio (FOIR). Ideally, your FOIR should be between 40-50%. Simply put, your monthly debt obligations towards your loan shouldn’t exceed 40-50%.
Besides, lenders check your repayment records. If you have made timely repayments against your home loan, your education loan approval will be faster.
However, if you’ve taken the loan recently and have a sizeable amount pending, you’ll be paying EMIs for a long time. So, lenders may not accept your property as collateral.
Additional Read: Things to Look Out for While Signing Education Loan Documents
Get your documents in order
When you apply for an education loan on property, you must submit your property documents along with your identity proof, income proof, and address proof.
Generally, lenders request your property registration certificate, property tax receipts, and home loan documents as proof of ownership. Sort all the original documents before approaching the lender.
Research and compare lenders
While you can take a personal loan for education under a home loan property, you must take both loans from the same lender. However, this might not always be the ideal option for you.
Suppose you have taken a home loan from Lender A, but Lender B offers you lower interest rates on education loans. Additionally, the interest rates on home loans are similar. How to get an education loan from Lender B in this case?
Well, you can shift your existing home loan to Lender B through loan balance transfer. Then, you can get an education loan from Lender B at preferential interest rates.
Additional Read: Ways to Prevent Defaulting on Education Loan
And finally, apply for your loan!
When planning finances for your education, turn to Tata Capital. Keeping the needs of students in mind, we offer flexible repayment options and affordable personal loan interest rates. With our hassle-free application process and quick disbursal, quality education is just a step away. So, visit our website today!