There are many doubts among students related to education loan on property and one of them is whether they can get an education loan on a property that already has a loan on it. We get students asking questions in comments if “banks give education loans on collateral security that is already pledged for another loan or not?”

And that’s why we decided to cover this point as a whole in this article.

Yes, banks give an education loan on collateral that is already under another loan, be it a home loan or an education loan (could be for your sibling). How much you can get will depend on the current market value of the property, the pending amount to pay off the loan, the lender, you’re taking it from, and so on. However, a property already under a personal or business loan cannot be pledged again before you clear off the loan.

This will be a comparatively short article that aims to provide knowledge on how to get a student loan on home loan property. We are covering this topic since our viewers on the LoanFlix web series have been asking us whether they can re-pledge the property that is currently under another loan or will they get an education loan if they have a home loan?

You can also watch the third episode in the Inshorts series which will clear all your notions about an education loan on a home loan property.  

What is a home loan property?

The term "home loan property or property already pledged" can be confusing for many, as it may mean two things. So let's break it down and understand what it is through scenarios. 

Scenario 1 - Assume your parents have taken a home loan by putting the home itself as security. Suppose the parents had taken 50 lakhs as a home loan 15 years ago and have been paying EMIs ever since and have paid off 40 lakhs towards their home loan.  

So the question was will the banks accept and provide you an education loan on this property (Home)? As already answered, banks can provide an education loan on such property. 

Scenario 2 - Your elder sister has taken an education loan for higher education by putting your parent's home as collateral security. She had taken a 50 lakhs collateral education loan 5 years ago and has paid off 40 lakhs towards her education loan.

Now again the question is, can banks provide you an education loan for your higher studies on the same property (Home)? Yes, banks can provide an education loan on such property. 

The home that was pledged as security in both the above scenarios may be referred to as a home loan property by different peoples. I hope this must have given you some clarity on which all collateral/property is referred to as "home loan property or property already pledged". 

With that, now you know you can pledge collateral that is already under home/housing loan as security for an abroad education loan.

A common myth about home loan property & education loan

There is a common misconception among students and parents that a home loan property cannot be pledged as collateral security for a collateral education loan. 

This assumption that property would be rejected because it has a housing loan is a complete myth and a misleading assertion.

Due to the lack of information regarding the various clauses of education loans, students are not aware that they can get an education loan on a home loan property as well. As a result, students end up opting for unsecured education loans, which have higher interest rates.

Eligibility for education loan on home loan property

The standard eligibility criteria will be the same for a student applying for an education loan like their past academic records, university, the country they are going to, etc. 

What lenders will also check is your and your co-applicant's CIBIL score and if you've been paying your home loan EMIs on time, it will reflect on your CIBIL report which will work in your favor. 

How to calculate an education loan amount on home loan property?

To calculate the considerable amount on home loan property, different lenders use different formulae. The following are the two key factors that go into determining the amount of a home loan property-

1. The market value of the home loan property being pledged.
2. The pending amount that has to be paid to clear off the loan.

The above-mentioned factors greatly affect the final education loan amount to be granted by the banks. 

It must be clear by now that banks do accept home loan property for education loans. However, banks will not give education loans on the original value of the property. Apart from the pending loan amount to be paid against your home loan, the respective bank will calculate a certain percentage as risk margin, and deduct this value from your actual collateral value. You will then get an education loan on the balance amount.

For example- suppose you have a pending loan of 10 lakhs on collateral whose current value is 50 lakhs. So the formulae to calculate the considered value of the collateral is 

Current collateral value- (risk margin x pending loan) = considered value for education loan. 

Let’s say the risk margin here is set by the lender is 1.5

Put values in the formulae you get 

=50-(1.5x10)

=35

So here, the collateral value which the lender will consider is 35 lakhs and not 50 lakhs. 

Mind you, different lenders keep different risk margins for calculation. If you have a home loan with any bank, you can use this calculator to calculate your considerable amount on home loan property.

You can also get in touch with our team at WeMakeScholars, as they can tell you not only how much you can get on the home loan property but can also assist you during your entire education loan process. 

Which bank is best to take a student loan against home loan property?

It is usually advised to get your education loan from the same bank your home loan is currently with because it will eliminate the legal and valuation of the property, since the bank has all the collateral documents with them already, the loan process can be done faster.

If you take an education loan from a different bank then you are required to transfer your home loan to the bank where you’re taking an education loan from. This may take longer than expected, which is why you should apply for your education loan early.

To answer the question, which banks are best? Government banks undeniably provide the best deal on education loans like lower interest rates, payment-free moratorium periods, etc. If your home loan is currently with a government bank like SBI, BOB, etc, it is better to apply for the education loan in the same bank.

If your home loan is currently with a private bank, it is better to transfer it to any of the government banks and then apply for an education loan in the government bank. The effort will pay off in the long term, as you will save lakhs of rupees thanks to the government banks' reduced interest rates.

In most cases, candidates are well aware of the benefits offered by the Government banks, still, many of them hesitate to process through Government banks due to a lot of misconceptions in the market like delayed loan process, delayed responses, etc. 

Yes, Government banks may take longer to process your education loan, however, this is not the case when you apply via  WeMakeScholars. We work closely with banks to ensure that your loan is approved in the shortest period possible.