Is LAP (loan against property) Beneficial for arranging educational funds?

Posted by Bhavna Singhal on June 14th, 2019

Savings are an important part of our adult life. It helps us to meet various expected and unexpected financial obligations. However, regardless of the size of savings, there are some financial obligations that require additional financial assistance such as the higher education of your child or even yourself. This expense can be met by taking an education loan. However, there are certain instances where it becomes difficult to procure an educational loan. These include:


Loan for a course, college or university that has not been approved by government-appointed agencies.


Loan for an amount exceeding Rs. 20 lakhs.


The repayment tenure exceeding 8-10 years.


In all the above-mentioned cases, an education loan fails to fulfill your immediate as well as long-term needs. In such a case, it is better to opt for a loan against property (LAP) instead. To procure this loan, all you need to do is to mortgage your property as collateral to the bank. Banks generally give a loan amount of about 50-70% of the market value of the property.


Advantages of taking a loan against property for education


Here are a few advantages of taking a loan against property:


Higher loan amount: The loan amount in the case of an education loan is generally capped at Rs. 20 lakh. So, if you want to procure a higher loan amount, you can opt for a loan against property. For instance, if the market value of the property is Rs. 60 Lakhs, you can expect a loan amount ranging from 24 lakhs to 39 lakhs, thus making it convenient for you to pursue your higher education, at a college or university in a country of your choice.


Quick approval: Since it is a secured loan, the lender is at a low risk of losing the money as he can recover the amount by selling off the property pledged as collateral. Hence, you can get the approval of LAP easily as compared to an education loan. An education loan can be declined due to various reasons such as the low income of the parent, bad CIBIL score, college/university not approved by AICTE/UGC.


Lower interest rates: Loan against property is offered at a lower interest rate as compared to an education loan.


Longer repayment term: Banks expect a repayment of education loan within 8-10 years from the completion of course that the student is pursuing. In some cases, it may not be possible it takes a substantial amount of time to find a befitting job. In addition, getting the expected salary which meets the repayment terms may take longer than expected. On the other hand, LAP offers a longer repayment period of up to 20 years and helps reduce the financial burden on you.


Flexibility: The loan amount disbursed for an educational loan is often credited directly to the institution or college. In case of a LAP, the disbursed amount is handed over to you, thus ensuring that you can use it for multiple purposes, as you deem fit. Hence, if you want the additional funds to sponsor your child’s living expenses, you can conveniently do so with the help of loan against property.


Now that you are aware of the advantages of a LAP Loan (loan against property) for your education, we hope that you can make a better-informed decision, and enjoy reduced financial liability and numerous benefits of this cost-effective loan alternative!


Like it? Share it!

Bhavna Singhal

About the Author

Bhavna Singhal
Joined: June 5th, 2018
Articles Posted: 22

More by this author