Education loans: When do lenders demand collateral from borrowers

Lenders need collateral for a considerable amount to secure their loans. In case the borrower defaults, they can auction off the collateral to recover their funds.

Let’s look at the collateral requirement of some more prominent lenders in the education loan space if a student plans to take a loan for studies in India.

State Bank of India

The bank requires collateral for loans above Rs7.5 lakh. However, the lender maintains a list of premier Indian institutes like IIT (Indian Institute of Technology) and IIM (Indian Institute of Management) foe which it offers collateral-free loans up to Rs40 lakh.

Bank of India

Bank of India’s collateral requirement is the same as State Bank of India – only for loans above ₹7.5 lakh. However, Bank of India offers collateral-free of up to ₹30 lakh for select premier Indian institutes.

Punjab National Bank (PNB)

Like the two public sector banks, PNB asks for collateral above ₹7.5 lakh.

Bank of Baroda (BoB) and Federal Bank

Conditions for collateral are the same for these two lenders. However, they have some more requirements. For loan amount between ₹4 lakh and ₹7.5 lakh, lenders ask for a third-party guarantor, according to data from Paisabazaar.com.

BoB offers collateral-free loans of up to ₹40 lakh for select premier Indian institutes, whereas Federal Bank offers ₹20 lakh in collateral-free loans.

HDFC Credila

Being a non-banking financial company (NBFC), the collateral amount for HDFC Credila depends on the applicant. On its website, the company states: “HDFC Credila can offer up to ₹20 lakh without surety for talented and deserving applicants”.

Avanse

Like other NBFCs specialising in education loans, Avanse, too, is flexible. It determines collateral based on the loan amount and the creditworthiness of the principal borrower.

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