The student loan market in India is estimated to be Rs. 733 billion as of 2018. This rapid growth in the market is mainly due to the increase in expenses of studying at a top university. An education loan in India is one of the easiest ways to fund the expenses required. It is widely availed to fund educational expenses because of flexible tenure and affordable interest rates.
Here are 5 conditions when an individual should not consolidate a loan against property for education.
- If You Have An Existing Short-term Loan
Consolidation is a part of the basic explanation of the features of education in India. It is a general consensus that opting for a consolidation when you already have an existing loan is the wrong financial decision to take. Short term loans such as personal loans and business loans have a higher rate of interest. If you have excess funds at hand, it is always advisable to part-prepay or foreclose loans which have higher interest rate first. Consolidate such loans first before the loan against property.
- If The Current Study Loan Is The Most Suitable Loan
Individuals can consider consolidating their loan against property for education if they think the interest rates of the loan is high for them. Leading financial institutions provide balance transfer facilities with such loans. Borrowers can avail balance transfer facility and shift their loan to a lender which they think will cater to their needs. But if your lender already offers the best loan terms and features, it is advised not to consolidate the loan just for better rates of interest. You should consider the additional charges to transfer the loan, which will be applicable from both lenders.
- If You Need To Avail Another Loan For The Consolidation
Consolidating a student loan against a property usually benefits borrowers who cannot meet the monthly payments associated with the loan. However, loans against properties generally have lower interest rates than other unsecured as well as most secured loans. If you need to avail another loan to consolidate the loan against property, then you will have to pay higher interests on the same loan amount not to mention the additional processing charges required to avail the new loan.
- If The Loan tenure Is Near Its End
A loan against property comes with long repayment tenure. Each payable EMI consists of two parts, a principal part, and an interesting part. At the start of the tenure, the interest parts are much higher than the principal part, i.e., you are repaying most of your interests with the EMIs early in the tenure. Towards the end of the tenure, you are finally repaying the loan amount you availed more than the EMI. So, consolidating the loan towards the end of the tenure will only make your repay more interest on the same loan. You will find that you still have a substantial amount of the loan amount you availed yet to be repaid.
It is always advisable to consolidate loan against property for education near around the middle of the tenure.
Financial institutions like Bajaj Finserv offer student loans such as a Loan Against Property for Education with affordable interest rates. Some of the other features that they provide are-
- Flexible tenure.
- Easy balance transfer facility.
- Loans of up to Rs. 1 Crore and Rs. 3.5 Crore for salaried and self-employed individuals respectively.
They Also Provide Pre-approved Offers That Make Availing Such Loans Quick And Simple.
Availing A Loan Against Property For Education
A loan against property requires a simple application process. But before applying for the loan you must have the documents required for education loan. You can qualify for a loan against property by meeting these simple eligibility criteria.
The steps to avail an education loan against property are as follows-
- Fill up the application form
- Confirm your details when a representative from the lender contacts you
- Submit the required documents
- Get the sanction letter after document verification
- After property evaluation and final verification, the lender will sanction the approved loan amount.
With this knowledge of how to get a student loan and conditions when not to consolidate it, you will have a clear idea about loans against property for education. It will help you to understand why consolidating is not a good option in some cases as well as when and how to do so.