The education system has made great strides in advancing our nation through education as circumstances have changed, yet along with this ongoing development, education costs are also rising quickly. It can be quite difficult to afford education given the cost of living, but happily. We have education loans that allow us to do so and fulfill our dream of going to college. Education loans have become a solution that allays the worries of the students. No student would be without the resources to finance their ambition of studying abroad with the aid of education loans. In India, banks furthermore offer unsecured education loans.
For students hoping to pursue further education at esteemed institutions in India or abroad, an education loan is a tremendous asset. It’s getting harder for parents to use their money to pay for their child’s higher education as the expense of higher education rises year after year.
Types of education loan
There are two types of education loans:
Secured: A secured loan is one where the student must pledge collateral in exchange for the loan in order to be eligible. Both tangible and intangible assets, such as an insurance policy, fixed deposits, and non-agricultural land, are accepted as collateral.
Unsecured: A loan that does not require the student to pledge any type of security in exchange for it is referred to as an unsecured loan.
Collateral requirements for education loan
To lower the risk of the loan, banks and NBFCs want a guarantee from a third party or collateral. In the event that the borrower defaults on the loan, the lender will use the collateral to recoup its losses. Property, such as a home, apartment, bungalow, or piece of land, as well as other assets like life insurance, fixed deposits, etc., are examples of common collateral security.
Non-collateral student loan- Eligibility criteria
The majority of public sector banks, provide students with more than 60 percent of grades appropriate preferences. Because unsecured loans do not require collateral, banks establish stricter demands for applicants’ academic performance. It is to meet the requirements for qualifying for unsecured education loans.
A gap in education
Any break in your academic performance or in the time since you graduated must be explained in a letter to the bank in order to demonstrate your education loan eligibility for unsecured student loans.
Backlogs in the academic profile
Many bank employees may say that students with more than three backlogs are not considered to qualify for an education loan when students directly approach most government banks in India for a non-collateralized education loan. However, if the student successfully clears his or her backlogs within the allotted course duration, the student may apply for an unsecured education loan.
Except for undergraduate diploma and certificate programs, government banks accept all types of degrees, including post-graduate, Ph.D., undergraduate, and undergraduate courses.
How to get an educational loan without collateral
Apply for the loan under CGFSEL
When applying for an education loan that is more than Rs. 4 lakhs, the majority of lenders demand that the borrower put up collateral. However, borrowers can obtain loans through the CGFSEL (Credit Guarantee Fund Scheme for Education Loans) program without putting up any security.
Apply for the loan with a private lender
Recently, a number of private banks began giving meritorious students uncollateralized education loans. However, contacting a private lender has a number of disadvantages, including hefty interest rates that start at 11%. By putting up collateral, borrowers can lower the interest rates levied against them.
Alternatively, while applying for an education loan without collateral, applicants can also offer a third-party guarantee. However, take note that in the event the principal borrower defaults, the third-party guarantor will be responsible for repayment.