Loan Against Property vs. Education Loan: Which one is better for you?

Loan against property (LAP) and education loans are two choices for funding that you may consider to finance your education. To decide which one better suits your needs, read on to understand the different aspects of both.

If you don’t know already, education loans are usually issued against collateral in the form of properties that may be residential or industrial. However, while both tend to loan against land, the difference is in the final intent of the loan that affects the way the financial institutions view the loan. The probability of repayment is based on the student’s academic profile.

Some Highlights to consider

Here are some features that you must consider before applying for a loan:

  • Both have the ability to finance your child’s schooling
  • Large credit sum for Loan Against Property
  • Long tenure, low EMIs for LAP
  • Low-Interest EMIs for LAP

What about education loans?

Education, especially higher education, is costly. The average inflation of even 10 percent will lift the cost of a four-year engineering degree from Rs.8 lakhs currently to more than Rs.17 lakhs, eight years down the road. If you plan to study abroad, the cost becomes even higher. For example, several engineering colleges in the United Kingdom charge tuition fees of anything between Rs.17-25 lakh.

More about LAP

Loan Against Property is a credit charged against a property’s mortgage. Your mortgage property can be a flat, a home, or even just a piece of land that you own. The amount of loan you’ll get depends on the market value of the land. Any of this loan’s aspects are:

An elevated amount of loan 

As a secured loan, you are entitled to obtain a higher loan sum as opposed to an education loan at reasonable interest rates. Loan Against Land, for instance, pnb housing loan against property, offers sums of up to Rs.1 crore to salaried individuals, and up to Rs.3.5 crore to self-employed individuals at competitive interest rates.

Long-standing tenure 

The tenure of pnb housing loan against property is also longer than the tenure of education loans and will last for up to 20 years. The tenure will vary from 5-7 years in the event of an educational loan. Monthly EMIs are lowered by a long tenure and vice versa.

For example, for loan repayment, a Loan Against Property provides salaried individuals with a versatile tenure of 2-20 years. Self-employed people can select a tenure with a span of up to 18 years. You just pay the interest on the loan from the approved loan limit against the amount of property used.

Flexible interest rates

PNB Housing’s lap loan interest rate is generally flexible, depending upon your income levels and other factors. You can always speak to a representative at your nearest PNB Housing branch to discuss the prospects of securing the lowest lap loan interest rate.

What’s the choice, therefore?

Compared to loans against properties, the repayment period for education loans is shorter. Shorter tenure means you have to pay higher EMIs, which may place pressure on your monthly expenditures, pushing back crucial financial targets by a few years. In all aspects, loan against property is indeed a better alternative.

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