How To Use Collateral Security For Education Loans?
An education loan that is offered based on collateral security, i.e., a promissory note or trust deed, is termed a secured loan in India. Most prominent government banks in India nowadays calculate the cost of secured loan amounts by considering the value of collateral security offered by borrowers. The repayment term of the secured loan is also long. Hence, an education loan with a long repayment term is not an ideal option for many borrowers in India. However, there are several exceptions to this general rule.
In some states like Wisconsin and New York
the lender may consider the borrower’s creditworthiness irrespective of whether the borrower has any collateral security. Similarly, in some cases, the loan market may be flooded with a large number of unsecured loans that have variable repayment terms. Hence, in such cases, the lending base may be less. And the government loan can serve as an effective remedy to such borrowers.
Many businesses that are unable to make repayment
of their secured loans may opt for unsecured business loans in India. Many reasons contribute to the growing popularity of unsecured loans. One is that it is quick and easy to get approval for unsecured business loans in India. Another is that it may be offered at very marginal rates of interest.
Collateral security acts as a guarantee for the lender
If the borrower fails to repay the loan amount, the lender’s risk will increase and he will have to repossess the collateral security. However, the borrower must ensure that he does not default on his obligations otherwise he may lose his asset. It is possible to get fast approval for these loans. And it is also possible to get loans at a relatively lower rate of interest.
Collateral security can be used for education loans
Collateral security can be used for educational loans to purchase computers, laptops, and other electronic gadgets. The loan amount in this case can be used for various purposes like purchasing a car for students, paying for vacation and other holidays, and meeting other personal expenses. In fact, collateral security for education loans is beneficial for borrowers as it facilitates an easier credit check process.
In some cases, collateral security for education loans
can be used to help borrowers buy cars or other vehicles that are not very expensive. However, it must be ensured that borrowers do not use such cars for personal use. The lender would be able to ascertain that the car being pledged is being used for the benefit of the borrower. The education loan process in India may be simplified with the use of collateral security. This can be applied along with the FDI provided by the Indian authorities or banks.