Choosing the right loan to finance your child’s education can be confusing. While education loans are the obvious choice, a Loan Against Property (LAP) can sometimes be a better fit. In this blog, we’ll explain what a Loan Against Property is, compare it with an education loan, and show you why it might be worth considering.
Loan Against Property vs. Education Loan
| Aspect | Loan Against Property | Education Loan |
|---|---|---|
| Definition | A LAP is a secured loan where you pledge your property—residential, commercial, or industrial—as collateral to obtain funds for any kind of needs. | An Education Loan is a financial product specifically designed to cover educational expenses, including tuition fees, accommodation, and other related costs. |
| Purpose | Versatile; can be used for various needs, including education, business expansion, medical emergencies, wedding, etc. | Specifically designed to cover educational expenses such as tuition fees, accommodation, and other related costs. |
| Collateral Requirement | Requires collateral, typically immovable property like a house or land. | Higher loan amounts require a collateral |
| Loan Amount | Depends on the property’s market value; lenders may offer up to 75% of the property’s value. | Varies; depends on the lender and course. |
| Interest Rates | Generally lower due to the secured nature of the loan; rates may start around 9.25% p.a. | Typically higher than LAP; rates can range from 11% to 15% p.a. |
| Repayment Tenure | Longer tenures, often up to 15-20 years, resulting in lower EMIs. | Shorter tenures, usually 7 – 8 years, leading to higher EMIs. |
| Tax Benefits | No specific tax benefits unless the loan is used for purchasing or constructing property. | Interest paid is eligible for tax deduction under Section 80E of the Income Tax Act. |
Read More: How to Apply for LAP without Income Proof?
5 Reasons a Loan Against Property Might Be Better than an Education Loan
1. Potentially Lower Interest Rates
Because a Loan Against Property is secured by real estate, lenders generally face a lower risk of default and can offer comparatively lower interest rates.
Education loans—especially unsecured ones—tend to have higher rates because the lender takes on more risk.
Check Out: Loan Against Property Interest Rates
2. Larger Loan Amounts
The loan amount you can secure against a property usually depends on the market value of the asset. This can sometimes allow borrowers to access a higher loan quantum compared to education loans, which are typically capped at covering tuition and academic-related expenditures.
Higher loan amounts can help cover not just tuition but also additional costs like living expenses, travel, and other expenses.
3. Longer Tenure and Possibly Lower EMI
Loan Against Property often comes with longer repayment tenures than traditional education loans (15 – 20 years). The extended duration can result in lower monthly EMIs, making repayment more manageable. This is more beneficial if you’re not immediately earning an income or if you anticipate needing a more extended period to repay.
4. Easier Access to Additional Funds or Top-Ups
Midway through a course, students often discover additional expenses—professional certifications, advanced study materials, research-related travel, etc. If you already have a Loan Against Property and have been consistent with your repayments, negotiating a top-up loan might be simpler.
5. Fewer Restrictions on Eligibility Requirements
For many education loans, the student may need to meet specific criteria, such as minimum academic scores, acceptance into recognized institutions, or a solid credit history. With a Loan Against Property, the primary eligibility factor is the property’s value and clear title, making the process potentially more inclusive for students or families who might not meet strict education-loan criteria.
Read More: Loan Against Property vs. Business Loan
Compare Loan Against Property Interest Rates – 2025
| Banks/ NBFCs | Rate of Interest | Maximum Loan Amount |
|---|---|---|
| SBI | 10.60% p.a. – 11.30% p.a. | Rs. 7.5 Crore |
| HDFC | 9.50% p.a. – 11.00% p.a. | 65% of the market value of the property |
| IDFC | 9.25% p.a. onwards | 50% – 70% of the market value of the property |
| Tata Capital | 14.25% p.a. onwards | Depending on the market value of the property |
| Axis Bank | 10.50% p.a. – 10.90% p.a. | Rs. 5 Crore |
| Kotak Mahindra Bank | 9.50% p.a. onwards | Rs. 5 Crore |
| Bank of India | 10.10% p.a. Per lakh | Rs. 5 Crore |
| LIC Housing Finance | 9.70% p.a. – 11.55% p.a. | Rs. 2 lakhs onwards |
| PNB Housing Finance | 9.24% p.a. – 12.75% p.a. | 70% of the market value of the property |
| ICICI Bank | 10.85% p.a. – 12.50% p.a. | 75% of the market value of the property |
How Can Credit Dharma Help?
Getting into your dream university is a once-in-a-lifetime opportunity. This may require substantial funding, but we make it easy. At Credit Dharma, we make this possible by offering lowest guaranteed Loan Against Property interest rates that keep your monthly payments manageable, allowing you to enjoy more of what truly matters.
But that is not it. We offer:
- Guaranteed up to 100% funding
- Receive lifetime assistance and expert guidance long after your loan is approved.
- Enjoy a fully digital process with minimal paperwork
- Get your loan approved within just 1-2 weeks.
Frequently Asked Questions
If you have enough savings and don’t want to deal with monthly loan repayments, self-financing can be simpler and interest-free. However, an education loan lets you keep your savings intact and spread out the cost over time.
A student loan is specifically designed for educational expenses, often offering flexible repayment schedules, moratorium periods, and tax benefits. A loan against property may have lower interest rates and allow larger borrowings but uses your home or other property as collateral, risking foreclosure if you default. Pick an option that aligns with your financial situation, risk tolerance, and the amount of funding you need.
High interest rates and the obligation to start repayment soon after graduation can be stressful. Missing payments can harm your credit score, and extended repayment durations may result in paying more interest overall. Careful planning—factoring in future earning potential—is vital to ensure the benefits of the education outweigh the debt burden.
Individuals who lack a co-signer (if required), have very poor credit history, or cannot meet the lender’s basic eligibility criteria—such as admission to a recognized institution—may find it challenging to secure an education loan. Additionally, some lenders may not approve loans for certain courses or institutions they consider high-risk or unaccredited. Always check the lender’s specific rules before applying.
HDFC Home Loan
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