Everything To Know About Education Loan With Collateral

Written by Alifya Khambati

Having earned a Masters degree in Advertising, Alifya has had her fair share of opportunities in the commerce sector, only to figure out that writing is her calling. Giving wings to this passion, she pens content for UniCreds.

August 22, 2022

Higher education might seem inevitable for the larger lot of students but continues to remain a dream for many. One cannot deny that higher education either in one’s home country or abroad is an expensive affair. Exorbitant tuition fees coupled with hefty costs of accommodation, transport, food, and others can be a heavy burden. Students and their families find it immensely difficult to bear these costs and it often results in the shattering of the dreams of many. To solve such weighty issues, banks and financial institutions have started providing education loans to help students effectively shoulder these costs. There are several types of education loans in the market and an education loan with collateral is a popular choice for many. 

In this article, we learn a bit about the different types of education loans, what an education loan with collateral is, as well as collateral documents for education loans among other details. 

Education Loans

The market is flooded with loans. Everywhere you look there are advertisements for home loans, insurance policies, gold loans, and many such. Education loans are one type. They help provide financial assistance to students looking to pursue higher education but are unable to do so due to a lack of funds. They help shoulder costs related to tuition fees, accommodation, travel and other living expenses during university. Education loans like other loans are divided into two broad categories. 

Secured Loans: A secured loan is where the borrower would pledge an asset against the loan given. This is essentially an education loan with collateral. The asset pledged could be a tangible or an intangible asset. Due to the presence of collateral, there is a lower associated risk with a secured loan. This also equals a lesser rate of interest.

Unsecured Loans: As opposed to an education loan with collateral, the borrower is not required to pledge any asset as collateral against the loan in the case of an unsecured loan. There are several non-banking financial companies (NBFCs) and even certain banks that provide unsecured loans. There is a significant amount of risk involved and the rate of interest is also higher in an unsecured loan. 

Assets Accepted As Collateral 

Having opted for an education loan with collateral, it is advisable to know what assets banks and non-banking financial companies accept as collateral. They are divided into two types:

Tangible Assets: Physical assets that can be pledged as collateral. Examples are a house, apartment, bungalow, shop, non-agricultural land, vehicle, etc. 

Intangible Assets: Non-physical assets that can be pledged as collateral. Examples are fixed deposits, life insurance, stocks, etc. 

Documents Required For Education Loan

The borrower/applicant is required to submit certain documents as part of the application process for an education loan with collateral. They are listed as follows:

  • Copy of passport
  • Identity Proof (PAN Card, Driver’s License, etc.)
  • Residence Proof (Aadhar Card, electricity or telephone bill)
  • Admission letter from the university
  • Past academic certificates (X and XII mark sheets, Degree certificates, etc.)
  • 2 passport size photographs
  • Mark sheet of GRE, GMAT, TOEFL, IELTS (whichever is applicable)
  • University ranking printout

Documents Required For Collateral

Post submitting the documents required as part of the application process, there are certain documents to be submitted to verify the collateral the applicant has pledged in order to get the loan. 

  • Deed of registered sale agreement along with property title
  • Original registration receipt for the above agreement
  • Allotment letter by the municipal corporation or any government authority such as CIDCO, MHADA, HUDA, etc. (if applicable)
  • Encumbrance Certificate (EC) of the last 30 years, commonly known as Link Document.
  • Latest property tax bill bearing the same address
  • Copy of municipality-approved plot layout or building plan

Why Take An Education Loan From A Govt Bank?

Students are always torn between opting for a loan from a private bank or its government counterpart. There are several reasons why opting for an education loan with collateral from a government bank is better compared to a private bank. 

  • The rate of interest provided at a government bank is way lesser as compared to a private bank. This really helps save money. 
  • The processing fee charged is also minimal which helps save costs. 
  • The moratorium period at a government bank is quite flexible and authorities are not too stringent even if an EMI of 2-3 months is late. 
  • Larger loan amounts couples with longer repayment periods are offered at government banks as compared to their private counterparts. 

If you enjoyed reading this blog on “Everything To Know About Education Loan With Collateral” and found it an informative read, make sure to check out other stuff from us. 

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