How to Take a Loan against Property to Put Your Child through College?

The cost of higher education is growing at a frightening pace, much faster than the inflation rate. It is estimated that if the costs keep increasing at the current rate, then by 2025, an MBA degree would cost around ₹50 lakhs and an engineering degree is expected to cost ₹25 to ₹30 lakhs.

If you are thinking of sending your child to a foreign university, then you would have to spend even more. The annual cost of a 4-year course in a private institution in the US was $48,510 in 2018; more than double the amount two decades back, according to a 2019 study conducted by 24/7 Wall St.

Going by the trends, it seems that your salary alone might not be enough for providing your child the best education. However, there are other ways to procure your children’s’ education costs such as loan against property.

What is Mortgage Loan?

For those thinking what a mortgage loan is, it is a type of secured loan in which you put your property as the collateral. You can use any type of property as collateral to get a mortgage loan, be it a plot of land or even a farm. The loan you get depends upon the property’s market value.

Why Taking a Loan against Property is great for Funding Education?

Some of the reasons that make it suitable for funding your child’s education are:

• Low Interest Rate

One of the biggest benefits is that the rate of interest is quite affordable. This is because these are secured loans. In these loans, the interest rate is generally between 12% and 15%. But, in unsecured loans, it can be up to 25%.

• Longer Tenure

Banks deem loans against property as low risk, since they are secured. This means that they often allow longer repayment schedules. In case of a personal loan, the tenure is generally 7 years at most. But in case of mortgage loan, the tenure can be up to 15 years.

• Higher Amount

Like mentioned before, college education can be really expensive. But with loan against property you can get amounts ranging from ₹ 5 lakhs to ₹ 10 crore. However, your property should also be valuable enough. The loan amount is generally 60% to 70% of the property value.

How to Take a Loan against Property?

The process of getting such a loan is extremely simple. All you need to do is carry the necessary documents to a bank branch. And your loan can get approved in as less as 72 hours. The list of documents required for a mortgage loan application is:

• Completely filled application form with signature.
• Residence and identity proof, such as Voter ID card, PAN card, and Aadhar card.
• Proof of income, such as salary statements of last 2 months, three months bank statement or ITR forms of last 3 years.
• Documents of the property.

You would then need to pay some processing fees and prepayment charges. And your application would be processed.

Loan against property can also be considered if you have plans for business expansion, your child’s wedding costs or an emergency medical expenditure. Loans can be availed within 72 hours of application.