Overseas education loans come in two types: secured and unsecured, also known as loans with and without collateral. The key difference between these two is whether or not you pledge collateral or provide a guarantee to the lender. Both types of loans are available for students who need to borrow finances from banks, NBFCs, or international lenders.
Despite the availability of both options, secured overseas education loans are more popular due to their higher loan amounts and additional benefits. Let’s quickly dig in!
When applying for secured education loans, borrowers must present a security or collateral against which the loan is given.
Many people take these loans after collecting a large sum of money is required. They receive an assurance from the lender about borrowing an amount they refund after some time. But what is meant by collateral? Collateral is what you promise before taking any credit to ensure that the lending institution can claim it by force -possession as payment for what you owe in case of default or bankruptcy.
A secured education loan, also known as an “education loan with collateral,” has several important features:
Tangible Assets | Intangible Assets |
Non-agricultural land | Fixed deposits |
House | Life insurance policies |
Apartment | Stocks |
Shop | Mutual funds |
Government bonds |
Unsecured education loans, also known as education loans without collateral,” are personal loans that do not require security. They are meant to cover the costs of students studying overseas. If a student fails to pay back this money, it can be recovered because it lacks security as a guarantee.
To approve an unsecured loan, lenders often check the borrower’s creditworthiness. Here are some key features:
To qualify for an education loan without collateral, students must meet the following requirements:
To understand the basic differences between secured and unsecured education loans, refer to the comparative table below:
Difference | Secured Education Loan | Unsecured Education Loan |
Requirement of Collateral | Property or fixed deposit as security for the loan | Does not require collateral but may need a financial co-applicant |
Loan Amount | Generally higher, depending on the value of the collateral | Lower compared to loans with collateral |
Interest Rates | May be low due to the security pledged | May be high due to the absence of security |
Eligibility Criteria | Relaxed, as the collateral serves as security | Stringent, as the lender relies on the borrower’s creditworthiness and co-applicants financial stability |
Loan Processing Time | Longer due to documentation, property valuation, etc. | Shorter due to fewer requirements |
Nomad Credit is here to assist you. Contact us, and our team will guide you through the process. Our expertise and guidance ensure a smooth and seamless experience in obtaining the right education loan for your international education journey.
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Because of collateral valuation and additional documentation requirements, secured educational loans typically take longer to process than unsecured ones. Unsecured loans, conversely, do not require any form of guarantee, so they are usually quickly processed.
Secured education loans typically allow for higher borrowing amounts, as the loan is backed by collateral. Unsecured education loans usually offer lower loan amounts due to the increased risk for the lender.
Your individual circumstances determine whether secured or unsecured education loans are preferable. If you need more money and have something valuable to borrow against, consider taking out a secured loan. On the other hand, if you lack security yet enjoy an outstanding credit background and financial stability, then you ought to be inclined towards unsecured lending.
With secured education loans you will be able to repay them at your own pace because of their elasticity or taking a long-term to repay them. Unsecured education loans, on the other hand, are necessarily quicker with scarce chances of evading that because they may require some installment before one completes school.
Some lenders allow this option, but it depends on their policies and your eligibility.
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