All You Need To Know About Education Loan with Collateral | GyanDhan

In the past, if a student planned to go abroad for studies, then they definitely needed to have a fat bank balance to support their education abroad. However, things changed in 1995 when SBI started providing education loan for studying abroad. From 2001, the Indian banking sector started giving out education loans, and since then, Lakhs of education loans in India for study abroad were taken by students from different financial backgrounds to convert their dreams of attaining higher education into reality.

This is a companion discussion topic for the original entry at

What kind of property can we pledge to get an education loan from PSBs?

Also, why is CIBIL score required if I am taking the loan against property?

There are mainly three types of property that you can pledge -

  1. Immovable property - includes house, flat, apartment, plot with a boundary
  2. Liquid assets - LIC Policy, Fixed Deposits, etc.
  3. Third-party - collateral owned by a relative or a friend, if they are willing to pledge it on your behalf.

Keep in mind that original documents will have to be submitted even if it is third-party collateral.

CIBIL score is basically your credit worthiness. It is a report that shows your credibility, how regular you are with your EMIs and other liabilities. Banks often check this before giving the loan as they don’t want a student loan to turn into an NPA (Non Performing Asset). They want to make sure that you will be regular with your EMIs and will not default.

Can we pledge agricultural land?

No. Agricultural land is not accepted as collateral.

Can we get tax benefits on an unsecured education loan?

So NBFCs provide secured education loans?

Yes, you can get tax benefits on an unsecured education loan provided it is taken from a bank. Non-Banking Financial Companies are not eligible under this scheme. Since public banks only give an unsecured education loan on INR 7.5 lakhs, you can also approach private banks for the same.

NBFCs do provide secured education loans. However, banks have the best schemes when it comes to secured education loans. There are many benefits such as high value loans, lower rate of interest, nil or fixed processing fee. NBFCs are private players and they tend to charge a higher rate of interest. Even the processing fee is 1% or 2% of the loan amount. It is always beneficial to take a secured education loan from a public sector bank.

Hi team,
I am in the initial phase of applying for a secured loan. Can I pledge PPF as collateral or not?? I do not own a property or any other asset. What else can be pledged to cover the loan amount?
Please help!

Banks/NBFCs do not accept PPF as a collateral because it is not possible to attach the PPF balance in case of a default.

The most widely accepted collateral for education loan are property (including land based on certain compliances) and fixed deposits. Government securities, NSCs, surrender value of insurance policies are also accepted as valid collateral. Typically lenders do not accept gold as a collateral, though one could explore taking a gold loan depending on the requirement. Lastly shares/securities are also typically not accepted as a valid collateral in most lenders, and would require a significant haircut even where accepted.

Are the collateral papers taken under the custody or just they take a copy as proof?

At the time of the loan sanctioning, you need to submit the photocopy whereas at the time of disbursement you need to submit the original papers. The papers will be with the bank until the loan is repaid.
Here is a video which you might find useful, it talks about the disbursement process from nationalized banks like SBI which primarily do the loan with collateral:

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Hello mam I am pursuing MCom from Pune university this year in the month of April I will be completing my MCom degree. I am planning to study abroad for further course can you please suggest me which course will be suitable for me as per my qualification. Countries I want to apply for Canada ,Australia, Germany. And my financial condition is also not good .

Hi @Raj_singh,

Some of the courses that you can explore are - MBA, Chartered Accountant (CA), Company Secretaries (CS), Chartered Financial Analyst (CFA), Financial Risk Manager (FRM), Certified Financial Planner, Digital Marketing, Cost and Management Accountant, etc. You can also go for the research and teaching field - pursue a Ph.D.
It really depends on your interest and goals. Before choosing a course or a program, ask yourself what you really see yourself doing for the next considerable years. Once you have finalized a course, post here so that I can share a list of colleges you can apply to in your target countries.

As for your financial condition, you can apply for an education loan and scholarships.

Scholarships -
There are two types of scholarships - External and internal.
External scholarships are given by private companies, state governments, and other organizations. This blog will help you with a list of scholarships -

Internal scholarships are scholarships given by the universities you are targeting. Most abroad universities keep aside some scholarships and financial aid for international students. They can be both merit-based (given based on the academic record of the student) and need-based (given based on the financial need of the student - the need is determined by the university itself).

Scholarships rarely cover the entire cost of abroad education. So education loans are the easy and most obvious choice.

Education loans -
There are two types of education loans - Secured education loans and unsecured education loans.
Secured education loans require the applicant to pledge collateral. The value of the collateral will decide the loan amount you can borrow.

Unsecured education loans require an earning co-applicant to co-sign the loan. Co-applicants can be anyone from the immediate family - mother, father, sister, brother. Income is the most important factor in unsecured education loans.

To see if you are eligible for a loan, check your loan eligibility on our website - Gyandhan > Loans > Check loan eligibility.

Hope this answer helps you. All the best!

Both of my parents doesnot have ITR and are retired. But i have good collateral which is a property, please let me the probability of getting a loan?

Income and ITR is not an important factor in the case of secured education loans. For loans with collateral/security, the market value of the property will determine your eligibility for a loan and the amount that you can get.
For example, if the market value of your property is INR 50 lakhs, you can borrow up to 100% of that amount from certain lenders. As you said that you have a good collateral, with a good market value you will be able to get a loan easily.
I suggest you check your loan eligibility on our website for an instant quote.
To know everything there is to know about Secured Education Loans, read this blog -