Education Loan Rejected? Loan Against Property is a Better way to Finance Your Child’s Education

All parents save throughout their lives to ensure good education for their children. Unfortunately, education, especially higher education, has become expensive and these days, more often than not, one's savings aren't enough to put a child through college. The majority of Indian students and their parents seek external financial assistance in the form of education loans to be able to afford a college education. However, education loans have their shortcomings.  

To start with, under an education loan, one cannot get access to funds over Rs.20 Lakh. While 20 Lakh is a decent amount of money, it wouldn't be enough if your child aspires to go to a foreign university. Further, the tenor for an education loan ranges between 5 and 7 years. This is not a very long period and sometimes, this short tenor leads to young students feeling burdened into taking any job that would help them pay off their loan. This kind of pressure is not good from a career perspective. Lastly, if your child plans to go to a university that is not approved by government agencies, you won't be able to get an education loan.  

Other than these certain disadvantages, parents and students should also know that education loan applications do not always get approved. Sometimes, lenders reject education loan applications. The most common reasons for rejection include:  

• If your CIBIL score is under 650, chances are quite high that your education loan will get rejected.   
• Sometimes parents' income isn't enough to meet the lender's eligibility criteria. In such cases, lenders hesitate from sanctioning an education loan. 
• When students want to pursue a course not approved by government agencies, availing an education loan becomes difficult.   
• The student has chosen to pursue a course in a country that does not feature on the lender's list of preferred countries to study abroad.  
• Unsatisfactory academic records can also lead to education loan application rejection. 

If a student's education loan application gets rejected, what should they do? Should they give up on their dream of pursuing higher education? The answer is no. Even if your child's education loan application has been rejected, there is still a way to raise money and give wings to their dreams. In this article, we tell you all about education Loan Against Property and why you must consider availing them to pay for your child's education. 

What is an Education Loan Against Property?

If you have a property in your name, you can unlock the value hidden in your property by taking a loan against it. A Loan Against Property is a secured loan. Under this type of loan, a borrower pledges their property as collateral. However, the ownership rights of the property stay with the borrower and the borrower can continue to use the property as they like.  

If your education loan application has been rejected and you own a property in your name, here's why you should consider taking an education Loan Against Property to fund the education of your child.  

Benefits of an Education Loan Against Property

Zero End-Use Restrictions

Funds availed of under a Loan Against Property come with zero end-use restrictions and therefore, borrowers can use the money for anything they like, including paying for a child's education.  

Substantial Loan Amount

Under an education Loan Against Property, borrowers can avail of up to Rs.5 Crore or higher, basis eligibility. Access to such a substantial amount of money ensures good education - it does not matter how expensive the university is that your child has chosen, with this kind of money, you will be able to give them the education they want and deserve.  

Low-Interest Rates

Loans against property are secured loans and carry the minimum risk for a lender. Lenders, therefore, sanction these loans at low-interest rates. With a decent income profile and a good CIBIL score, borrowers can expect to get loans against property interest rates as low as 9.75%* for self-employed individuals.  

Long Repayment Tenor

Borrowers get the flexibility to repay education loans against property over a period stretching up to 18 years. This flexible repayment period gives borrowers ample time to repay the loan comfortably. Most education loans, on the other hand, come with a tenor stretching between only 5 to 7 years.  

Final Thoughts

In conclusion, if your education loan application has been rejected, you must consider availing a Loan Against Property to fund the education of your child. However, while applying for a Loan Against Property for education, keep the following things in mind: 

Under a Loan Against Property, lenders offer anywhere between 60% to 70% of a property's value as a loan. Before beginning the loan application process, get your property evaluated so that you know what you are eligible for. Make sure that your chosen lender is offering you an amount that you qualify for.  

Research options. Do not accept the first loan offer you get. Instead, talk to as many lenders as possible and negotiate with them for a good interest rate. 

Just because you are eligible for a certain amount does not mean you should take it. For instance, if your property makes you eligible for an Rs.1 Crore loan but you need only Rs.50 Lakh, you should take only Rs.50 Lakh. This way, you will be able to pay off the loan easily and early and become debt-free quickly.  

Loans against property involve collateral, which is your property. Therefore, borrow only what you can easily repay. Keep your EMIs affordable, even if it means opting for a longer tenor. You don't want to jeopardise your property rights.  

Before beginning the application process, make sure you meet your preferred lender's eligibility criteria. If you do not meet a lender's eligibility criteria, do not apply for a Loan Against Property. Not meeting the eligibility criteria leads to rejection, which, in turn, leads to a low CIBIL score.  

Loans against property involve a substantial amount of money and therefore, lenders sanction these loans after proper due diligence. In other words, loans against property do not get sanctioned immediately. While some lenders can process these loans within a few days, some take weeks to process them. So, keep some buffer time. 

Make sure the property you plan to pledge as collateral has a clear title. If the property is disputed in any way, no lender will give you a loan against it.

In conclusion, if your loan application has been rejected, do not worry. Apply for a Loan Against Property and give your child the education they deserve.