Loan Against Property vs Education Loan: Which one is better for you?
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Loan Against Property vs Education Loan: Which one is better for you?

  • Highlights

  • Both can fund education

  • High loan amount for Loan Against Property

  • Long tenor, low EMIs for Loan Against Property

  • Interest-only EMIs for Loan Against Property

Education, particularly higher education, is expensive. Having one of the highest inflation rates, an average inflation of even 10% would increase the cost of a four-year engineering degree from Rs.8 lakhs today to over Rs.17 lakhs, eight years down the line.The cost is even higher if you plan to study abroad. For instance,most engineering colleges in the UK charge anything between Rs.17-25 lakh as tuition fees.

Loans against property and education loans are two financing options that you can contemplate to fund your education. Read on to know the various aspects of both to decide which one best serves your needs.

Loan Against Property

Loan Against Property is a loan paid against the mortgage of a property. The property you mortgage can be a flat, a house, or even just a piece of land you own. The amount of loan you’ll receive depends on the property’s market value.Some of the aspects of this loan are:

- High loan amount

Being a secured loan,you are eligible to receive a higher loan amount at competitive interest rates as against an Education Loan.

For example, Bajaj Finserv’s Loan Against Property offers salaried individuals amounts of up to Rs.1 crore, and self-employed individuals upto Rs.3.5 crore at affordable interest rates.

- Long tenor

The tenor for loans against property are also longer than that of education loans and can last up to 20 years. In case of an Education Loan, the tenor can range from 5-7 years. A long tenor lowers the monthly EMIs, and vice versa.

Additional Read: How To Determine The Ideal Tenor of Your Loan Against Property

For instance, a Loan Against Property from Bajaj Finserv offers a flexible tenor of 2-20 years to salaried individuals for loan repayment. Self-employed individuals can opt for a tenor ranging up to 18 years. With the Flexi Hybrid feature, you pay only the interest on the loan against property amount utilized from the approved loan limit.

Surge in demand and disbursal of education loans

Of late, there has been a surge in the demand and disbursal of education loans in India. According to a report, banks and financial institutions disbursed Rs.20,000 crore in education loans in FY 17, up from Rs.17,000 crore the previous year.

Generally, education loans are unsecured in nature.It means you do not have to pledge any asset as collateral. However, education loans with loan amount of Rs.7.5 lakh or higher, may require collateral. Though there is no cap on the disbursed loan amount, the loan amount can range anywhere between Rs 20-50 lakhs.

The repayment period for education loans are shorter compared to loans against property. Shorter tenor means higher EMIs and this could put pressure on monthly expenses thereby pushing back critical financial goals by a few years.

Additional Read: How To Apply For A Loan Against Property: A Step By Step Guide

The final choice

Both, loans against property and education loans are prudent modes of finance for your education needs. While a high loan amount and flexible tenor are the highlights of a Loan Against Property, education loans serve the needs of those who are unable to pledge a property as collateral. Remember to check your loan against property eligibility for both and compare the interest rates before applying.

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