Different types of collateral for overseas education loans


Overseas education loans have become a saviour for students who wish to study abroad but lack finances. However, to get an education loan abroad, they turn to banks or NBFCs. But the banks and NBFCs seem to confuse students by revealing information about collateral and non-collateral loans. Now, you also must be wondering what the difference is between a collateral and a non-collateral loan. Not only this, but you must have questions about which type of overseas education loan to prefer.

You must continue reading the article to learn more about this.

Types of loans for international students:

Obtaining a study abroad loan is a common way for individuals aspiring to fund their education overseas. However, upon entering a bank, many encounter the challenge of understanding the distinction between secured and unsecured education loans. If you are finding it difficult to grapple with these situations, then below we have clarified the same:

Secured Loan:

Secured loans, also known as collateral-based loans, require individuals to pledge specific assets as collateral against the loan. The pledged collateral serves as a security measure for the lender, providing assurance and mitigating the risk, which translates to favourable terms for the borrower. These collateralized loans are readily available for higher education and often come with a relatively lower interest rate compared to unsecured loans.

Unsecured Loan:

Conversely, unsecured loans, also referred to as non-collateral loans, do not necessitate the pledging of assets to banks or non-banking financial companies (NBFCs). While unsecured loans are available at reasonable interest rates, it's important to note that these rates are typically higher than those offered with secured loans. Without the requirement of collateral, unsecured loans provide a financing option for students who may not have tangible assets to pledge but come with the trade-off of a higher interest cost.

Understanding Collateral in Education Loans:

When students opt for a collateral loan, they are required to pledge assets as security against the loan. But what exactly is collateral? Collateral serves as a form of security for the loan by providing the loan provider with an asset guarantee.

Types of Collateral:

Borrowers can categorise the collateral they pledge against an education loan into two main categories: tangible and intangible assets. 

Intangible or liquid assets:

Banks and non-banking financial companies (NBFCs) widely accept intangible assets, often referred to as liquid assets, as collateral for education loans. Here are some commonly accepted intangible assets:

  1. Bank Deposit: When you make a bank deposit, you place a sum of money in a bank account, often earning interest, which can be pledged as collateral.
  2. Fixed Deposit: A fixed deposit is a specific type of bank deposit where the funds are locked in for a predetermined period and the deposit receipt can be used as collateral.
  3. Government securities: Bonds or other financial instruments issued by the government, serving as a secure form of collateral.
  4. NSC, KVP, or LIC Policy: Investors can pledge National Savings Certificate (NSC), Kisan Vikas Patra (KVP), or Life Insurance Corporation (LIC) policies as collateral since they are tangible documents representing investments.
  5. Mutual Funds: Investments in mutual funds, which represent a diversified portfolio of stocks or bonds, can be utilized as collateral for education loans.

Understanding the diverse forms of collateral, including intangible assets, expands the options available to students seeking financing for their study abroad endeavours.

Tangible and immovable assets:

Banks and NBFCs readily accept tangible and immovable collateral as two kinds of collateral. Tangible assets have a physical nature and cannot be moved. Lenders commonly accept the following types of real estate assets:

  1. Residential flat: a self-contained housing unit within a larger building, typically in a multi-story apartment complex. Residents can keep the documents as collateral.
  2. House: A standalone dwelling unit with its own land and structure, providing borrowers with the option of pledging their residential property.
  3. Open Plot: Vacant land that is undeveloped and available for construction can be utilized as collateral for securing an education loan.
  4. Shop: Commercial spaces, such as retail outlets or storefronts, are also accepted as collateral, offering borrowers flexibility in choosing their asset.
  5. Commercial Property: This includes buildings or land intended for business or income-generating purposes, making it a viable option for securing loans.

It's important to note that there are certain exclusions when it comes to acceptable collateral. Lenders typically do not accept agricultural land and properties falling under the jurisdiction of gram panchayat.

How can Education Loan Guru be of assistance?

Education Loan Guru is a trusted companion to students and helps them acquire a student loan for study abroad in a few easy steps. Education Loan Guru understands the complexity that students encounter in their way to attain the education loan for abroad studies. So, if you are also stuck in the loop of obtaining a collateralized overseas education loan but are not able to get it, then contact Education Loan Guru.

The Education Loan Guru will be your reliable guide to getting an overseas education loan. They ensure that a collateralized and non-collateralized education loan is readily available to students without worrying much.


The majority of students aspiring to study abroad look for education loans to fund their higher education abroad. Even though education loans are readily available to students, they should be aware of the kinds of loans required by them. Secured loans, for instance, require an individual to provide collateral like tangible real estate or intangible assets, offering lower interest rates and providing an attractive avenue for financing higher education abroad.

On the other hand, unsecured loans, while accessible without collateral, often come with higher interest costs. Education Loan Guru distinguishes itself as a reliable resource by streamlining the loan acquisition process for students amidst these intricacies. Whether in need of collateralized or non-collateralized loans, Education Loan Guru ensures that students can pursue their global education aspirations with confidence, offering valuable guidance and support along the way.

By Education Loan Guru