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Loan Against Property vs. Education Loan: Which one is better?

Now, most of the parents want their children to study from abroad or do their higher education from a renowned university, but higher education is expensive. A four-year degree or three-year degree can cost from 8 Lakhs to 20 Lakhs. And if they are thinking of abroad, then the tuition fee ranges from 17-25 Lakhs.

Loan against property and education loans are the two best options for financing education.

Loan Against Property

The loan that is paid against the mortgage of the property is called Loan against property. The property you mortgage can be a piece of land, or a flat or even a house or a bungalow. The property’s market value will decide what amount of loan you’ll get from the property. Some of the benefits that you enjoy with Loan against property is:

High loan amount– The loan given by the bank depends on two factors; the value of the property and the repayment capacity. It is a secure option since you will get a high amount with less interest as compared to the education loan. For instance, the organization Bajaj offers employees amount up to Rs. 1 crore and the self-employed people get up to Rs. 3.5 crore at low-interest rates.

Long Repayment Tenure  A person can pay the loan against property over a period of 20 years through the mode of EMI. The tenure for an education loan, can maximum stretch up to 5-7 years only. A longer repayment tenure lowers the monthly EMIs that the individual has to pay to make it easier for him/her. For instance, the company Bajaj gives you the liberty of about 2-20 years for the repayment of your loan for salaried employees and for self-employed people it ranges from 2 to 18 years.

Increase in demand and expend of Education Loans

There has been a sudden increase in the demand and expend of education loans in India. According to the facts, banks and other financial institutions have spent around Rs. 20,000 crores in education loans in the year 2017 and Rs. 17,000 crores in FY 18.

Loan against property is more secure than education loans. Education loans require collateral if your loan amount is higher or equal to 7.5 Lakhs. But in the case of Loan against property, the amount is a lot higher around Rs. 20-50 Lakhs.

The repayment period for the education loan is shorter as compared to the period for the loan against property. With short repayment period comes the pressure of high EMIs which is the case of education loans. It is thus resulting in pushing your goals a few years forward.

Conclusion The final choice

For the funding of your higher studies or abroad goals, the best options are Loan against property and education loans.

With the benefit of the high loan amount and a long repayment tenure, the loan against property is considered the most promising option. But for the people who are not in the state for any mortgage, the education loan serves their needs.

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