Financial institutions provide secured loans such as loans against property to borrowers who require a high loan amount to meet their specific financial requirements. To avail this loan, individuals have to mortgage property to the lender.
The amount of sanctioned funds is decided by the lender according to the loan to value ratio or the needs of the borrower, whichever is lower. Loan against properties are secured loans so, in certain circumstances, they can be availed even with a low credit score. Students and parents often consider a loan against property as an alternative to conventional education loans.
India produces a large number of graduates every year across multiple streams that require funds to finance their higher studies. Many utilize their personal savings but a majority of students look for education loan details and offers. Many banks and NBFCs provide loans to fund higher academic degrees.
Top lenders require a minimum CIBIL score and above to approve a loan. Students barely have a credit score, let alone a good one. This has led to individuals with low CIBIL score to opt for a loan against property. NBFCs provide these loans after evaluating the qualities of the beneficiary and the value of the asset pledged. If the loan officers deem a student as highly capable, he/she will receive an education loan amount than a student who is considered moderately capable.
Tips To Avail Loan Against Property With A Bad Credit Score –
- Learn About Loan To Value (Ltv) Ratio
Loan to value is the ratio of the loaned amount to the value of the property mortgaged. It is generally expressed as a percentage of the value of the mortgaged property. An individual can be offered LTVs as high as 80%. But with a poor CIBIL score, lenders are most likely to offer as much as 65% LTV for the loan. You can avail a loan against property for education even with a poor CIBIL score but you may not be able to avail most other secured and unsecured loans.
- Value Of Property
If you understand the concept of loan against property, you will know that the amount sanctioned is a direct function of the value of the mortgaged property. Your chances of approval increase with the increase in the value of the said property. If your loan requirement is higher, pledging a high-value property will fetch you the required loan amount. This is how you can use the value of your property to your advantage while applying for a student education loan. For this reason, many people consider loan against property is a better way to fund a child’s education.
- Provide Required Documents
You will be required to submit multiple documents while applying for such secured education loans. Therefore, it is essential to know about the education loan details before applying. Providing the documents as and when asked for will ensure that your loan is approved. If you fail to provide the required documents, it is highly probable that your loan will be denied. Keep your property papers handy.
Refer to lenders such as Bajaj Finserv who offer such loans against minimal documentation requirements and less stringent eligibility criteria as well.
Bajaj Finserv also provides you pre-approved offers that make availing loans quick and easy. Pre-approved offers are available on numerous financial products including secured credits like home loans, unsecured credits like business loans and personal loans, etc.
- Know Your Eligibility And Needs
This is a time-tested method to enjoy a hassle-free loan approval. First, you need to have a clear idea whether you qualify for a loan against property by meeting the eligibility criteria and the amount you are eligible for. Apply for an amount that is less than the eligible amount to increase your chances of approval.
Additional Read: Know More About Vidya Lakshmi Education Scheme
It is imperative for education loan applicants to know the loan amount they need. It is always advisable to apply for only the required funds as the loan amount and avail the same. Even if the applied loan amount is approved, the borrower will need to pay a higher amount of total interest and EMIs for the loan.
Loans against the property for education are now popularly considered as a viable alternative to unsecured education loans. They can be availed even with a low CIBIL score given that the borrower has a high-value property to mortgage and applies for a comparatively low loan amount.