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Secured Student Loan

Updated on 01 April, 2024

Neha Uppal

Neha Uppal

Sr. Content editor

Banks and other financial institutions offer education loans to help students cover their higher education expenses. These costs could include books and supplies, tuition fees, and living expenses incurred while pursuing a higher education degree. 

Payments are usually deferred during the period in which students study at college. Some lenders also offer an additional deferment period or grace period of six months after securing a degree. 

Students can avail of loans for higher education. Their education loan is secured or unsecured. These loans can be taken from both government and private banks. Let’s learn a bit more about them in detail. 

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Types of Secured Loans 

Unlike unsecured loans, secured loans require the borrower or applicant to pledge any asset as collateral with the lender. These loans generally come with a lower rate of interest. 

If the borrower cannot repay the loan amount, the lender owns all rights to take over the asset kept as collateral. This aspect makes a secured loan one of the best ways to secure significant funds. Listed below are the different types of fast student loans –

1. Immoveable Property 

Tangible and immovable assets can be kept as security or collateral with an immovable property-secured student loan. 

The collateral under this loan would include ready-to-move-in property, clear demarcation lands, or even commercial properties. Another type of asset accepted as a secured loan is vehicles, mainly four-wheelers. 

2. Liquid Securities 

A second type of secured student loan can be availed of by keeping liquid securities an individual owns as collateral. These include Fixed Deposits, Government bonds, insurance policies, stocks, and even mutual funds. 

Till loan repayment, these securities become the financial institution’s possession. 

3. Third-Party Property 

Select financial institutions offer this type of secured loan. Under this type of secured loan, the assets or property of a third party can be kept as security. 

This could include a house owned by the loan applicant’s relatives or a vehicle. 

Secured vs Unsecured Loans 

Which one is better, secured or unsecured loans? Let’s determine that by drawing a comparison. The table below shows the difference between secured and unsecured student loans –

Point of ComparisonSecured Education LoanUnsecured Education Loan
DefinitionSecured education loans are those in which the borrower needs to keep an asset as security with the lender till the time of loan repayment. Unsecured education loans do not require the borrower to keep any asset as security with the lender. They are sanctioned based on the borrower’s creditworthiness. 
Processing DurationThe processing duration is longer when compared to unsecured loansRequire minimal paperwork and are processed quickly 
Interest RatesLower interest rates as these loans are backed by collateralHigher interest rates as they involve higher risk for the lender 
Repayment TenureProvided for a longer repayment tenure, and the loan amount can be spread over smaller instalments Provided for a shorter repayment tenure and helps save interest costs in the long run
Need for a Co-ApplicantDo not need a co-applicant, only a suitable collateral Require a co-applicant, as their income plays a crucial role in determining the borrower’s repayment capacity 

It is essential to mention here that a third option or kind of loan may be a partially secured student loan. Also known as an undersecured loan, the borrower can pledge any asset as collateral for a value lower than the loan principal. 

The remaining amount becomes an unsecured loan. Student loan suitability may differ based on assets, income, repayment abilities, and convenience. 

 

Conclusion 

Studying abroad is a dream for many students, and for good reasons. Even so, aspirants often abandon their goals because they need more financial funds. 

This need not be the case because banks and financial institutions offer secured, unsecured, and partially secured student loans to help meet educational expenses. This has enabled more and more students to pursue higher education abroad. 

This experience is worth it because foreign education opens up possibilities for a solid career and broadens one’s cultural and social horizons. 

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FAQs

Does a student’s academic record matter in the case of secured loans?

No. In the case of secured student loans, financial institutions are more concerned with the asset(s) kept as collateral. Parental income, as well as the student’s academic record, have little say in loan approval.

 

 


 

What are some tips to secure lower interest rates on student loans?

Some crucial tips to secure lower interest rates on student loans include comparing between lenders, choosing convenient installment options, and observing the method of interest calculation (which may be flat or at a reducing rate).

 

 

 

 

 

 


 

Neha Uppal

Sr. Content editor

Neha Uppal is a passionate content creator and editor. She carries 7.5+ years of experience working with leading edutech companies where she worked as a Faculty, Community Manager, and Content Marketeer. At upGrad, she is helping out people keep informed about the scopes and opportunities of studying abroad via informational articles/blogs.

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