There are a lot of questions among students regarding Education Loans on the property, one of the concerns is whether they can get an education loan on a real estate asset, that already has a loan on it. Students ask in the comments section if “banks provide loans to students based with collateral security that has already guaranteed to another loan, or not?”
This is why we discussed this issue as inclusive in this piece.
The banks offer an education loan against collateral that’s already covered by another loan, whether it’s a home or educational loan (could be for your child). The amount you’ll get will be dependent upon the market value at present for the home, the current amount to repay your loan and the bank the source of the loan, and other factors. A property that’s already subject to a personal or commercial loan can’t be promised
This is a comparatively brief article that will give information about how to get an education loan on the property that is a home loan. This is a topic we are covering since audiences have been asking us if they could re-pledge their property which is currently under another loan, or if they can get an education loan if they already have an existing home loan?
You can also view our other blogs, where we have explained the haze of an Education Loan in the property of a home loan.
What is home loan property?
The phrase “home loan property” or “property already pledged” is a bit puzzling for many because it could be a reference to two things. Let’s dissect and understand the meaning behind it through examples.
Scenario 1- Imagine that your parents got a mortgage for their home, placing the house itself as security. Imagine that your parents took 50 lakhs for a home loan fifteen years ago. They have been paying EMIs throughout the years. They have been able to pay off 40 lakhs of their mortgage.
The question is, will banks approve and grant you an education loan on real estate (Home)? As we’ve already said banks are able to provide an education loan to the owner of this property.
Scenario 2 – Your elder brother has taken an education loan for higher education by mortgaging your family home. He had taken a 60 lakhs collateral education loan 6 years ago and has paid off 35 Lakhs
Now considering that loan is partly paid off and now the property price might have increased too, can banks give you a loan to fund your studies at a similar home? Yes, banks can offer an education loan to a property. This can be something explained as refinancing the home mortgage.
The house secured by a pledge in both of the above situations might be defined as an investment property for home loans by different persons. I’m sure this will have provided some clarity as to what kind of collateral property is referred to as “home loan property” or “property that has already been guaranteed”.
Now you know that you can offer collateral that is already under a home or housing loan to serve as collateral for an abroad education loan.
A common myth regarding the home loan property and education loans
Usually, students planning to go to the UK, Canada, Ireland, and Australia have a general question like Can I get 30 lakh education loan for abroad studies? or Which bank is best for education loans abroad without collateral?
There is a common belief among parents and students that a home loan asset can’t be used as collateral for a loan used to finance education.
This assumption that the property would be rejected because it has a housing loan is a complete myth and a misleading statement.
Because of the lack of knowledge on the different conditions of loans for education, students aren’t aware that they can get an education loan from an investment property for home loans in addition. In the end, they are enforced to choose unsecured education loans that have a higher rate of interest.
The basic eligibility requirements are similar for students looking for an education loan such as their academic record or university, the country they plan to go to, etc.
What lenders are also looking for is the co-applicants’ CIBIL score, and if you’ve made the EMIs on time for your home loan time, this will show the CIBIL report, which could benefit you.
How do you calculate the education loan amount in the property of a home loan?
In order to calculate the huge value of a home loan, numerous lenders employ different formulas. These are the two most important factors in determining the value of a property that is a home loan market value for the property that is being pledged.
The outstanding amount has to be paid to pay off the loan
It should be obvious now that banks take home loans as education loans. But they will not offer education loans based on the initial value that the home has. In addition to the loan amount due on your home loan, the bank in question will determine a percentage of risk and subtract this percentage from the actual value of your collateral. You’ll then receive an education loan from the balance amount. For instance, suppose you are expecting a credit of 10 Lakhs for collateral that is currently worth 50 lakhs. Therefore, the formula to calculate the worth of collateral would be the value of the collateral at present (risk margin x loan pending) = estimated value for an education loan.
Let’s say the risk margin here is set by the lender as 1.5 Enter values into the formulae you’ll get
So, the collateral value the lender will consider 35 lakhs, not 50 lakhs.
Be aware that various lenders use different risk margins when calculating. If you’ve got an outstanding home loan from any lender, you can make use of this calculator to estimate the amount of the home loan property. It is also possible to contact us with our team via EduCred, since they can inform you not just how much you can borrow on the mortgaged property, but also help you through the entire educational loan process.
Which bank is best to take a student loan against a home loan property?
It is recommended to apply for your education loan from the same institution that your current home loan is made with, as it removes the legal and financial value of the property. Since the bank already has all documentation for collateral in their possession already so the loan process can be accomplished faster.
If you’re taking an education loan from another bank, you will need in order to pay off your loan from the institution that you’re getting an education loan. It could take longer than you anticipated and that’s why you must apply for your loan to study in the early stages.
To answer the question, which banks are best? Government banks undeniably provide the best deal on education loans like lower interest rates, payment-free moratorium periods, etc. If your home loan is currently with a government bank like SBI, BOB, etc, it is better to apply for the education loan in the same bank.
When your loan for your house is at a private institution you should transfer it to one of the banks that are part of the government to apply for an educational loan through the bank of the government. This will benefit you over the long run, since you’ll save thousands of rupees due to government banks’ lower interest rates.
In the majority of cases, people are conscious of the advantages provided by the banks of the Government however they are often hesitant to make a decision through government banks because of a myriad of misinformation in the market such as the delay in loan approvals, delayed responses, etc.
Yes, government banks can take longer to approve your educational loan However this isn’t the situation when you apply through EduCred. We collaborate with banks to ensure your loan will be approved in the fastest time feasible.
Is property required for an education loan?
No, the property is not mandatory to get an education loan. Students can obtain an education loan with no collateral i.e., without assuring any asset or other asset that is provided by private banks or non-banking financial institutions in India. However, if the student is willing to apply through government banks, then it is necessary to have a property to qualify for approval for an educational loan. If loans exceed 7.5 lakhs, the
Can I apply for an education loan if I have an existing home loan?
Yes, you can qualify for an educational loan though you have a pending home loan. It’s based on two aspects:
- The market value of the property that is being guaranteed.
- The incomplete home loan amount that is to be paid to the property.
These two elements greatly impact the amount of education loans that will be provided by Banks of the Government.