Higher Education Loan: Apply for Loan Against Property for Higher Education
Most loans act as a massive facilitator in covering your diverse needs. Not only will you have the monetary leverage, but you will also have the financial liberty and independence. Using them, you can buy a house, or car, plan a family trip, make a down payment, cover your education-related expenses, etc. When covering education-related expenses, a loan against property is sometimes preferred over a higher education loan.
These loans are readily available and can help you cover all your educational expenses. As suggested by the name, in a loan against property, you must pledge your property and keep it as collateral to get the principal amount. In return, you are charged a rate of interest, and the lender keeps the property until the loan is repaid.
But is it wise to use a loan against property instead of a higher education loan? Let’s find this out in this article, as it focuses on loans against properties and how they can help you fund your higher education.
What is a loan against property, and for what purpose is it applied?
A loan against property is a type of loan in which you use your property as collateral to get a loan from a lender. These loans are secure, and you can also get a huge loan. As the financing institution does not dictate the usage of the loan amount, you can use this loan for a variety of reasons. However, in most cases, these loans are taken to cover big-ticket expenses like investing in your business venture, financing higher education, etc.
What are the benefits of taking a loan against property for financing higher education?
There are several benefits of opting for a loan against property instead of going for an education loan:
- Higher loan amount:
Most banks and NBFCs allow a high amount to the borrowers to cover their big-ticket expenses. And in the case of higher education, you might need a lump sum to meet all the expenses like admission fees, dormitory, course fees, etc. Banks allow a loan amount of up to 65% of the total market value of your property. This is a huge benefit compared to a higher education loan, as the loan amount can be subsequently higher. The loan amount can be even higher if your property has a higher market value.
- Low rate of interest:
As this is a secured loan with fewer risks, most lending institutions charge a minimal interest rate. The Bank’s interest rate starts from 8% per annum for most property loans. This rate is also variable and depends on the individual’s credentials, the property’s market value, etc.
- Proper utilisation of the property:
A loan against property is the right way to finance higher education because it properly utilises your property. Instead of selling your property at a compromised rate, which might be worth more in the future, it is better to use it as collateral and regain ownership by paying the instruments. Selling a property is irreversible, so a loan is a convenient option.
- Higher loan tenure:
Though the loan tenure of most higher education loans is high, it is even higher in the case of loans against property. While most education loans can be taken for 15 years, property loans can be taken for 20 years or even 30 years in many cases. From a tenure perspective, a loan against property is a much preferable option compared to a higher education loan.
- High Flexibility:
As you pledge your property to get a principal, you get high flexibility benefits. You can choose the loan type, period, and repayment method. Flexi facilities allow you to repay the interest on the amount you use instead of repaying the entire principal amount.
Should you choose a loan against property instead of a higher education loan?
A loan against property might provide you with many benefits, but a higher education loan has more grip on tax benefits. Education loans are taxable and give the borrower the privilege of experiencing tax benefits under section 80E of the Income Tax Act, 1961. In addition, education loans have comparatively lower interest rates and associated benefits for students.
But from the perspective of tenure of repayment, a loan against property is a much preferable option. Since long tenure ensures a low EMI amount, it puts less stress on your monthly budget. The loan amount is also higher than an education loan which is another added benefit of going for a property loan.
If you don’t have a property to use as collateral and pledge for a loan, then a higher education loan will help you with that. Also, property loans are mostly taken for investing in a business, as the loan amount is high.
Conclusion
When it comes to choosing a loan for education, both these loans have significant benefits and demerits. If you are at a higher loan amount for a longer period, then a loan against property is the right option for you. But if you are someone who doesn’t have a property to pledge and wants more tax benefits, then a higher education loan might be the correct option for you. It depends on your monetary planning, the aim of taking the loan, and the financial muscle to tackle the interests and EMIs. If you want to know more about loans against properties, home loans, personal loans for education, education financing options, etc. you should visit Piramal Finance.