Securing an Education Loan with an Existing Property Mortgage
It is indeed possible to obtain an education loan for studying abroad even if you already have a property mortgage. However, the process can be quite complex due to the banks' risk assessments. This article explores the intricacies of obtaining an education loan when you have an existing property mortgage, while providing tips and resources to help you navigate through the process.
Understanding the Collateral Value
Calculating the Collateral Value
When you decide to use your property as collateral for an education loan, the bank will not simply assess it at its full value. Instead, they will take into account the outstanding balance on your property mortgage and apply a risk margin. For instance, if the current market value of your property is 50 lakhs and you have an outstanding loan of 10 lakhs, the total value available for the education loan would be reduced.
Let's take a look at the calculations involved. For example, consider SBI's formula for calculating the considered value of your collateral:
Considered value for education loan Current collateral value - 1.35 x pending loan amount
Using the numbers from our example, this would be:
50 lakhs - 1.35 x 10 lakhs 36.5 lakhs
In this case, SBI would consider the collateral value to be 36.5 lakhs, not the full 50 lakhs.
Other Considerations
This is just an illustration, and the exact formula may vary depending on the bank. It's crucial to check with specific banks for their exact criteria. Moreover, some banks may have more flexible options, such as providing an education loan as a top-up to your home loan, with a slightly higher interest rate.
Exploring Alternatives
While it's possible to secure an education loan with an existing property mortgage, the chances are quite slim. Most public and private banks tend to be hesitant about using a mortgage-secured asset for an education loan due to the risks involved. However, there are a few private banks that offer the option of using your home loan bank for an education loan, which can provide some flexibility.
In some cases, you might be able to obtain a non-collateral loan from private banks such as ICICI Bank, but the interest rate on such loans is usually higher. For example, ICICI Bank offers an education loan at an interest rate of 10.99%, which is more competitive than some other options.
Additional Tips and Resources
For a comprehensive understanding of the various aspects of education loans, including the process, eligibility criteria, and other relevant factors, I recommend you to watch the YouTube web series named LoanFlix. This series covers all the essential aspects of an education loan in great detail.
Key Takeaways
1. An education loan can be obtained, even with an existing property mortgage, but the collateral value is significantly reduced.
2. Banks typically calculate the considered value by subtracting the outstanding balance from the total property value and applying a risk margin.
3. Some private banks offer top-up options or non-collateral loans but come with higher interest rates.
4. Resources such as the YouTube series LoanFlix can provide valuable insights into the process and requirements.
By considering these factors, you can better prepare yourself for the education loan process and increase your chances of securing the necessary funds for your international studies.