The SBI for an education loan is the first option considered by most students who wish to fund their higher education abroad. It is common knowledge that in order to borrow an education loan for abroad studies from any government bank like the SBI, students are required to pledge any of the collateral securities. 

However, a lot of students and parents are unaware of the different types of collateral accepted by the bank for collateral education loans which fall under the SBI student loan scheme as well as the SBI Global Ed-Vantage scheme. This article will tell you about the different types of collateral which can be pledged for a government bank education loan, especially SBI education loans.

Before we begin exploring  collateral securities accepted by government banks like the ones offered by SBI, let us understand the two major SBI education loan schemes in brief.

The SBI Global Ed-Vantage Scheme

The SBI Global Ed-Vantage Scheme is a collateral education loan scheme that has been exclusively put together for students who wish to pursue their higher education in notable, prestigious universities abroad in countries like the USA, Canada, Germany, etc. This SBI education loan is granted especially to students who have secured admission for professional degrees like Masters, Ph.D. & M.Phil courses in universities and colleges abroad. 

The SBI Student Loan Scheme

The SBI Student Loan Scheme is specifically designed for students who are in need of education loans of up to INR 20 Lakhs to fund their higher studies in India. The terms and conditions of this education loan scheme are slightly different than the Global Ed-Vantage education loan scheme. The eligibility criteria for the SBI Student Loan Scheme are similar to that of the Global Ed-Vantage scheme. However, certain terms like the loan margin, collateral margin, etc. are different.

Types of Collateral Security Accepted for SBI education loan

A lot of students who wish to study abroad with the help of an SBI education loan are not very well aware of the types of collateral security that are majorly accepted by the bank for both the SBI education loan schemes. The types of collateral listed in this article are acceptable not only by the SBI but also by almost all major government banks which offer an abroad education loan. In any secured education loan process, it is essential to get a rough idea about the three major types of collateral which are accepted by all banks for an abroad education loan.

• Immovable Property: An immovable property is one of the most frequently pledged categories of assets as collateral against an abroad education loan. It involves assets like a house, a residential flat, a plot with defined boundaries, an independent house, a non-agricultural land, etc.
• Liquid Security: Did you know that government banks do accept liquid assets as collateral against an abroad education loan? Assets such as Fixed Deposits, government bonds, life insurance policies from government-approved lenders, etc. are accepted by government banks like the SBI, BoB, etc. as collateral security.
• Third-Party’s Assets: In case a candidate does not possess any of the above assets or if their values do not cover the required education loan amount, then they can pledge a third party’s assets as collateral security. This third party essentially refers to individuals who are not part of the candidate’s immediate family. For e.g., uncle, aunt, friends of the candidate or the primary co-applicant, etc.

Now that you have gained sufficient understanding of the three major types of collateral which are accepted for an SBI education loan, let us take a look at the legal acceptability of these categories of assets.

Immovable Property

As mentioned in the previous section, immovable property is one of the most commonly pledged assets in the education loan process. Despite possessing an immovable property whose value meets the requirements prescribed by the SBI, a lot of candidates are still not able to get an abroad education loan easily. A major reason for this is that many of them are unaware of the legal restrictions on the immovable property owned by their co-applicants. 

Before agreeing to grant an abroad education loan against immovable property, many government banks, including the SBI, give due consideration to certain factors of the asset which has been pledged as collateral security. 

• If the property was co-owned before and has been divided between two people of the same family, then it has to have clear, defined boundaries separating both sides.
• If the property in question is part of a bigger plot that was later divided into different sections, then loan applicants will be required to submit the registration documents of the bigger plot or the motherland, as is known in bank terms. 
• If the property being pledged as collateral was gifted to the candidate or their co-applicants, then the gift deed of the property has to be submitted Gift deed and Will should have been registered and now the property should be registered on New owner's name. 
• If the value of the education loan or that of the property being pledged as collateral exceeds INR 1 Cr., then the bank will require two legal and two valuation reports.

Immovable Properties not Accepted for an SBI Education Loan

Before we list out the different criteria that your immovable property needs to fulfill to get an SBI education loan, here is a list of properties that are not accepted by the SBI for an education loan under any conditions.

1. Agricultural lands are not acceptable, even if someone has built a house on them, it is still not acceptable. If that area is converted to residential, then get a “conversion document”.
2. Gram panchayat properties are not usually acceptable. Property has to be under Municipal Corporation. According to the SBI circular, Gram Panchayat property is not accepted. 
3. Cantonment Area property is not acceptable.  It includes- temporary quarters for troops and a permanent military station in India.
4. Properties used for social causes like a hospital, a school, etc can not be pledged. 

Immovable Properties Accepted by SBI for Student Loan

1. The bank prefers immovable properties located in urban cities as opposed to those located in rural areas.
2. Residential properties are given greater preference as opposed to commercial properties. It is recommended that you pledge commercial property as collateral only if you do not possess a residential property.
3. Empty lands are often less preferred by most SBI bank branches. Properties that have a building/house on them are often accepted by SBI for abroad education loans.
4. If you plan on pledging an empty plot as collateral, candidates need to bear in mind that plots whose boundaries are clearly defined are given preference over those which do not have one.

As mentioned in the above paragraph, SBI mostly prefers properties that are located in urban cities as opposed to those located in rural areas. However, even within the cities, SBI only accepts properties that fulfill certain criteria. Read one of our previous articles where we've mentioned the City-specific collateral requirements.

If you are facing any problems in your SBI education loan process, do get in touch with the SBI Digital Team for guidance regarding the same.

Liquid Security

Unlike immovable properties, SBI has set relatively easier criteria for liquid security which is being pledged as collateral against an SBI education loan. The following Liquid assets which fulfill the following criteria can be accepted as collateral against an SBI education loan.

Third-Party Collateral

A student may pledge both immovable properties as well as liquid assets belonging to a third party as collateral security against an SBI education loan. However, it is important to understand that an education loan taken against third-party collateral and loans against FD which is less than 6 months old are not accepted as funding proof by the embassies of Australia and New Zealand.

The process of getting a government bank education loan in India is considered by many students to be a painful affair because very few students have a good knowledge of some of the basic education loan concepts. In order to know more about the different factors of an easy education loan process, do get in touch with WeMakeScholars. Our team of Financial officers assists you with the entire education loan process until sanction, disbursement, and beyond. All the services offered by WeMakeScholars are free of cost as this initiative is supported by the IT Ministry, Govt. of India.