Education Loans with Collateral Security to Study Abroad in 2025

Pursuing higher education abroad can be a life-changing experience, but it often comes with a significant financial burden. To bridge the gap between your aspirations and your financial capabilities, education loans with collateral security can be a viable option. If you are wondering what is collateral education loan, it refers to a loan where you pledge an asset such as property, fixed deposits, or insurance policies as security to secure higher loan amounts and better interest rates.

What is Collateral in Education Loan?

Collateral security refers to the asset or property that a borrower pledges to a lender as a form of guarantee for an education loan. It provides the lender with a sense of security and reduces the risk associated with lending a large sum of money. In the event of loan default, the lender has the right to seize and sell the collateral to recover the outstanding balance.

Comparison of Collateral and Non-Collateral Loans

Before defining what is the collateral for student loans, let us first briefly understand the types of education loans. There are broadly two types of education loans as follows:

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  Secured education loans: Secured education loans require borrowers to provide collateral as security for the loan.

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  Unsecured education loans: Unsecured education loans do not require collateral or any form of security from the borrower. However, these loans require a co-applicant.

Pros and Cons of Collateral vs. Non-Collateral Loans:

Who Should Opt for Collateral-Based Loans?

If you are also wondering is collateral required for education loan, or looking for an answer, which loan type is suitable for you, collateral or non-collateral, this comparison will help you make an informed decision based on your financial profile and study plans.

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  If you are going for expensive courses or studying in countries with higher tuition fees (USA, UK, Canada).
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  With a weak financial co-applicant profile, you must go for secured loans. 
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  If you are looking for lower interest rates and higher loan amounts.
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  With sufficient property/assets and clean ownership documents, you should consider applying for secured loans. 

Who Should Opt for Non-Collateral Loans?

Below are some of the major reasons why you should go for education loans without collateral. 

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  If you possess a strong academic profile (high GPA, test scores).
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  If your co-applicants have stable income and a good credit score. 
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  If you do not have assets to pledge.
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  If you require quick approval on a loan, since asset verification takes a longer time. 

Click here to learn more about Secured vs Unsecured Education Loan for Abroad Studies

Watch our video to understand Collateral Education Loans for studying abroad in 2025

Different Types of Education Loan Collateral Accepted by the Lenders

There are broadly three types of education loan collateral accepted by the lenders in a secured education loan. If you're wondering what are the collateral required for education loan, it usually includes immovable assets like residential or commercial property, movable assets such as fixed deposits, LIC policies, or government bonds. Below are details of securities offered in education loans -

Tangible collateral security:

Lenders accept immovable property such as an independent house, flat, plot, or any non-agricultural land with a clearly defined boundary. A bank-appointed evaluator will evaluate the property as student loan collateral.

Intangible assets:

These include assets like Fixed Deposits (FD), Life Insurance Policies (LIC), or government bonds. These assets are taken at the exact value as they are liquid assets and can be converted into cash immediately. Some of the things that borrowers should keep in mind -

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  FD should be with the same banks from which you are taking the loan. 
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  The loan can be taken on an existing FD, or a new FD can be made for the purpose. 
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  The holder of the FD will earn interest on it as usual. 
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  LIC should be a maturing policy with a fixed maturity date to be pledged as collateral.

Third-party collateral:

If in the case, a borrower does not own collateral, they can pledge third party collateral for education loan belonging to a friend or a relative. The original documents of the collateral have to be submitted in this case as well.

How much Collateral is Needed for an Education Loan?

There is no definitive answer for it as the collateral security coverage and the amount of collateral required differ from lender to lender and from scheme to scheme. The required Collateral education loan differs from student to student. Below is a brief comparison of a few leading lenders to help you estimate the requirement for collateral. 

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  Public sector banks like SBI require 60%–65% of the collateral value equivalent to the loan amount. Bank of Baroda sanctions around 60% of the collateral value as the loan amount. E.g. – If the property value is estimated to be INR 1 crore, the loan amount sanctioned by SBI would be about INR 60–65 Lakh, whereas the Bank of Baroda would sanction around INR 60 Lakh. Private sector banks like Axis Bank sanction 60%–65% of the collateral value as the loan amount.

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  The education expenses covered by public sector banks like SBI are generally up to 90% under specific schemes. The remaining 10% has to be arranged by the student. An exception here is often cited with the Bank of Baroda, which may require collateral equal to 100% of the loan amount but does not typically cover 100% of expenses. However, Axis Bank states that it can cover up to 100% of the total expenses, though in some secured cases it may finance around 85%.

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  The student loan collateral value is evaluated by authorized property evaluators and is generally lower than the market value, but in compliance with the government rules and regulations of property evaluation.

Features of an Education Loan With Collateral

When applying for a secured overseas education loan, students should carefully understand the features of collateral loans.

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  Tangible or intangible education loan security is required for an education loan with collateral.
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  Secured education loans offer higher loan amounts, up to INR 3 crore, at lower interest rates (starting from 9.40%).
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  The interest rates for secured loans are usually lower than education loan without collateral.
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  Proof of parental income is not required, but having a good income can be beneficial.
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  Longer repayment durations are available for education loans with collateral.
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  Some banks, like SBI or BOB, offer no repayment during the study period, with interest accumulating.
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  Tax benefits under Section 80E may be applicable for secured loans from banks.

Eligibility Criteria for Collateral Security for an Education Loan

The education loan eligibility varies from lender to lender. The eligibility requirements are stricter for nationalized banks as compared to NBFCs, as they offer loans at comparatively lower interest rates. Let us take a look at some common 11 required to apply for an education loan with collateral.

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  The student must possess proper documentation of the collateral pledged as security. 
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  The student must be an Indian national. NRIs holding Indian passports can also take advantage of education loans. OCI students can get a loan for studies in India, but not for foreign studies, as they are no longer Indian citizens.
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  The student must have secured admission to a recognized institute. Most lenders ask for a copy of the acceptance letter with the loan application.
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  The student must have had a good academic history. The lenders ask the applicant to attach relevant mark sheets with the loan application. 
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  A good CIBIL score is an important criterion required by lenders.

Documents Required for Education Loan With Collateral 

The documents required for education loans with collateral vary based on factors such as property type, purchase history, and location. Students often wonder which of the following is compulsory for all collateral loans in India. We have listed the documents that are required for collateral loans.

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  Registered sale deed
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  Approved plan or map of the constructed property
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  Chain documents, evidencing the ownership history of the property for the last 30 years
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  Latest property tax receipt
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  Occupancy proof.

Additional documents if you’re applying for an education loan with a property in the following cities:

Mumbai or Pune:

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  NA order
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  Urban land ceiling order
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  NOC from a builder or society
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  Share certificate
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  Letter of allotment
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  Conveyance deed of society
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  If CIDCO / MHADA property: NOC and transfer letter

Hyderabad:

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  Urban land ceiling certificate
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  NA certificate, if not included in the sale deed
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  7/12 extract, if not included in the sale deed
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  Encumbrance certificate

Bengaluru:

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  RTC (Record of tenancy certificate)
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  Conversion order (from agriculture to residential)
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  Khata certificate ( A or B )
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  Property tax receipt
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  Encumbrance certificate

Read here to learn more about - 

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  Documents Required for Education Loan
• 
  Union Bank Education Loan Documents Required
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  Documents Required for Education Loan in SBI

Top Banks and Financial Institutions Offering Education Loans with Collateral

Below are some of the top lenders that offer education loans with collateral.