Things to know before applying for a Loan Against Property for Education
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Things to know before applying for a Loan Against Property for Education

  • Highlights

  • Choose the type of interest rate and read about the fees applicable

  • Meet the eligibility criteria and see if there are any limitations on your property

  • Keep all your necessary documents handy to get the loan faster

Financing your child’s education at prestigious universities in India and abroad is easier when you take a loan against property customised for education. Not only does this loan offering give you a considerable amount, up to 75% of the property value, but also gives you flexibility when it comes to using and repaying funds. Before you apply for it, keeping the following things in mind can help you make the most of it.

6 things to know when applying for a loan against property for education:

1. Interest rates and other charges involved

Since a loan against property is a secured loan, it offers funds at nominal interest. Still, it is wise to shop around and find a lender who offers it to you at the lowest interest. You can use an EMI calculator to apply different rates of interest to your chosen loan amount and tenor for easy calculation. Another factor to keep in mind is fixed and floating interest.

If you plan to take this loan for a longer tenor, your fixed interest may be a better option. Keep this in mind and read the terms and conditions carefully. Apart from the interest, there are other charges associated with every loan, which holds true for a loan against property too. Check to see what the processing fees, penal interest, EMI bounce charges, foreclosure charges and part-prepayment charges are.

2. Eligibility criteria that you need to match

Meeting the eligibility criteria for your chosen loan against property is the key to getting your loan application approved. Usually, you need to be an Indian resident, at least 25 years old, and salaried to be qualified for the loan. However, lenders will also check your income and job stability, your property, your existing obligations, and your credit history before sanctioning the loan. So, ensure that your credit score is high and your pay check has seen a steady rise to better your chances.

3. The type of property you can mortgage

As a loan against property is mortgaged against your property, you should also check your lender’s criteria when it comes to property. Usually this loan is sanctioned against both commercial and residential property. However, it is a good idea to check if your lender has other specifications. For example, some lenders may not accept vacant lots or agricultural land to be put up as collateral, while others may need your property to be insured before accepting it as security.

4. Loan amount available vs. your educational needs

Usually a loan against property gives you funds worth 75% of the total value of the property you put up. So, ensure that you calculate how much you require for your child’s education and then carefully plan how much you want to apply for. Let’s assume that the education expenses exceed what you have borrowed. In such cases, you can easily avail a top up loan. As long as the value of your loans do not exceed 75% of the value of your property, you can borrow additional funds to finance your child’s future. In case you are unable to predict the exact amount you need, since cost of tuition and housing can vary each year, you can also opt for a Flexi Loan Facility. This gives you a loan limit, which you can withdraw from as many times as you like. The advantage here is that you have access to maximum funds while you pay interest only on what you actually use. Ensure that your lender has these provisions in place.

5. Application formalities and disbursal time

Keep in mind that since a loan against property is a secure loan, your lender may take some time to evaluate the property that you are putting up as security. So, it is best to plan in advance and ensure that you have enough time between the loan application and the tuition fee deadline. You can also choose a lender who is known to disburse these loans faster and more effectively. Another way to help hasten the process is by getting all the documents needed for the application ready beforehand. These may include the KYC documents, your IT returns, bank account statements and the copy of your property papers. This will help your lender with the verification process. Bajaj Finserv has a hassle-free loan disbursal process that takes only 72 hours to complete.

6. Choosing the right tenor and evaluating the risk

Last but not the least, be aware that choosing the right tenor can greatly impact your repayment. A shorter tenor leads to higher EMI but attracts lowest interest. A longer tenor may reduce your EMIs, but means that you end up paying more as interest. So, understand these dynamics carefully and make a smart decision. Ensure that you are financially capable of repaying the loan and have other sources of income and investments to make timely EMI payments.

If you are looking for a loan against property to meet the expenses of a great education, look no further than Bajaj Finserv. Get great offers on loans at attractive interest rates. Think it. Done!

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