Education Loan Rejected? Finance Child Education through Loan Against Property

Was your application for Kid’s Education Loan rejected? Here’s still a way you can fund your Child’s Education. You can avail a Loan against property to finance his/her education.

Reasons why Education Loan may be rejected:

1. Income of the parent not meeting eligibility criteria.
2. College not approved by AICTE/UGC – Most banks only lend to AICTE / UGC approved colleges.
3. Bad Cibil/Credit history.

If you can’t get education loan, you can choose to unlock the hidden value of your property through Loan Against Property. Certain arguments in favor of this statement are:

Interest rates on Loans against property are quite similar to and in some cases better than Education loan Interest rates. Loan against property interest rates range from 12.05% – 15.00% for an amount of up to Rs. 30 lacs, whereas education loan comes at an interest rate between 10.25% – 14.00%. Get detailed Interest rates offered by banks on loan against property here. “Check LAP Interest Rates”

Secondly, most of the banks in India normally offer up to only 20 lacs amount as Education loan. What If your child dreams of going abroad for higher studies with fee of her course around 20 lacs. In such cases, Loan against property is a great way of not letting your finances come in the way of his/her dreams. You can get loans up to 65% of the property value in case of a Self occupied residential property and 50% of the value of a Self occupied commercial property. I.e. if you own a house having value of 50 lacs, you can get a loan of 32.5 lacs. Loans against property are also available on vacant and rented property.

Another argument that is in favor of going for a Loan against property is that these loans come with a longer tenure i.e. up to 15 years giving your child sufficient time to bear your burden.

Word of Caution: Loans taken against property in most cases don’t have a moratorium period. Moratorium Period is a holiday on repayment of Education loan which would be for the course period + 1 year or 6 months after the student gets a job/start earning whichever is earlier. Some banks will also allow you a moratorium on payment of interest. This means that you can defer payments of even the interest.

Hence, the parent has to pay for the loan during the time of the studies. You cannot delay those payments. After your kid finds a job and is well settled in his working environment, only then can loan be transferred.

So, evaluate your own financial position. Will you be able to bear the expenses of the loan for 3-4 years. If, Yes!, then you should definitely tap into the potential of property and get that loan. A Quality Education can change anyone’s life.