Education Loan Vs. Gold Loan: Which One Should You Choose To Fund Your Studies?

Aug 18, 2020

Education Loan Vs. Gold Loan: Which One Should You Choose To Fund Your Studies?

As per a report published in Times Graduate, the cost of higher education in India surpassed its inflation rate in 2017. According to the data put forth in this report, by 2025, the average cost of an engineering degree in India is projected to reach around Rs.25 lakh – Rs.30 lakh, while that of an MBA degree is estimated to be about Rs.50 lakh-Rs.60 lakh.

Apart from these specialised courses, the cost of higher education in private schools and colleges has also breached affordable limits for many mid-income families across the country. Admissions to colleges or universities abroad only put further monetary strain on these families. Such a scenario has, thus, made it necessary for many students to avail education loans to bear their expenses of higher education.

Now, applying for a student loan can be an arduous process, since they come attached with several eligibility criteria and such other conditions. However, with secured financing options like gold loans gaining momentum in the country, funding higher education has also become significantly easier.

Following is a guide through the education loan process in India, and how gold loans can be the most convenient option for securing funds for this purpose.

Education Loans: The Difficulties in Availing Them

With a rapid increase in the cost of education, both in the country and abroad, education loans have been emerging as a reliable support system for many. To fulfil such requirement, the RBI has introduced specialised education and study loans, available at various financial institutions across the country.

However, these loans impose several limitations which can make it difficult for a majority of the students to have a fair shot at completing their higher education from any of the premier institutions in India or abroad.

Some of the most common problems associated with these student loans include the following –

  • They impose stringent eligibility criteria, wherein only the students whose admission has been accepted in recognised colleges and universities can avail the loan.
  • Only the students who are accepted into Ivy League colleges or their equivalent when applying for higher education abroad are given preference for subsidised education loan interest rate.
  • These loans only cover the expenses incurred on paying tuition fees, and additional university or college charges. Travel fares, lodging costs, etc. have to be borne out of one’s pockets.
  • Since these are unsecured loans, they are only granted through an appraisal process based on one’s financial standing or at least a guarantor.

While these education loan eligibility criteria and conditions reduce the risk of lending, they can also make it difficult for someone to avail the loan.

However, there are a few alternative loan options that one can consider to avail financing for their child’s education. Gold loans, for instance, can be one of the most convenient means to gather funds.

Gold Loans: Why are they a useful solution?

Gold has, for a long time, played an active role in the lending and borrowing sector in India. However, of late, gold loans have become much more organised and consequently become a popular means of financing sizable expenses.

Several reasons reinstate why availing a gold loan to fund higher education can be considered beneficial over other loan options. They include –

  1. No stringent eligibility criteria

Unlike other education loan options, gold loans do not require borrowers to fulfil stringent eligibility criteria to avail it. Students, regardless of their merit, can avail funding through gold loans that can help them pursue their higher education without any financial hurdles.

The absence of lengthy documentation processes like income proof and ITR requirements further makes financing easy. All you need to do is provide KYC documents like your address and identity proof.

  1. No end-use restrictions

Higher education expenses, especially when studying abroad, does not merely entail the college/university tuition fee and other academic-based costs involved. These also include airfare or travel fare, lodging costs and other associated costs of living in a different country or state. In this respect, gold loans, without end-use restriction offer the perfect solution to fund these expenses without difficulty.

  1. No CIBIL score requirement

While it can be argued that banks offer lower rates of education loan interest as compared to gold loans, borrowers have to maintain a high CIBIL score to qualify for them. This criterion can be especially difficult to fulfil for students without any previous history of borrowing. On the other hand, gold loans do not require borrowers to fulfil any such criteria and are, in fact, beneficial for individuals looking to improve their CIBIL score.

Apart from the above factors, Rupeek Fintech Pvt. Ltd., one of the leading digital gold loan providers, also offers other attractive benefits with its services.

Benefits of Gold Loans Offered by Rupeek

There are several reasons why Rupeek’s gold loan can be utilised as the best education loan in India. These include –

  1. High loan to value ratio (LTV)

The lender sets its LTV or loan to value ratio so as to offer a high loan amount against the gold. The ratio reflects a percentage of the gold’s value that the lender is ready to provide as loan. You can thus avail the maximum loan amount against your gold, at the highest per gram value with Rupeek, thus maximising your chances of high-value funding.

  1. Doorstep facility to avail loans

This company has increased the accessibility of gold loans by introducing the doorstep facility to avail the advance. You will simply need to make an application through the lender’s app or website.

The lender will then appoint a loan manager to visit your house to complete gold valuation and KYC registration. After completion of these processes, the loan is approved and disbursed to your bank account, with the entire process taking only 30 minutes.

  1. Safe and secure

After the loan is disbursed, the loan manager waits at your house until you receive the amount in your account. He/she thereafter leaves your house with the gold, which is transported in a GPS-trackable bag and stored in the nearest partner bank’s safety vault until the loan tenure is over and you can repossess it. The pledged gold is also insured for the loan tenure thus mitigating any risk of loss or damage.

  1. Easy repayment terms

Another factor which makes gold loans more beneficial as a suitable funding option over other forms of borrowing is that it comes with easy repayment facilities. You will only need to pay the interest each month, while the borrowed amount is repaid through bullet payment at the end of the loan tenure. Also, you can choose to defer the entire loan liability until the tenure’s end and pay at a time to reclaim possession of your pledged gold.

You can utilise an education loan calculator to estimate the amount you can avail against the value of your gold asset. These loans have a flexible tenure ranging between 6 months and 12 months, as per your repayment convenience. All these features and benefits combined make gold loans a suitable option to fund higher education in India or abroad.

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