Why Are Student Loans Considered Unsecured


Are Student Loans Considered Unsecured? Student loan is one of the most beneficial and the most helping source for the students nowadays and that is being followed in almost everywhere in the world. But this is several cases becoming problematic for the banks and the financial institutions because in several cases these loans are not paid back to the institutions and are considered to be the bad debts from the banks.

Why Are Student Loans Considered UnsecuredThere are so many reasons for which the student loans are considered to be unsecured and the institutions which are not offering the student loans are just not offering for this reason that they do not have the particular guarantee of getting them back. Here are a few reasons for which this type of loan is considered to be unsecured;

  • A very common practice which is being observed and witnessed throughout the world is that the students do apply for the loan for their studies and once they have got the loan they do apply in the institutions abroad, so they leave that particular country. The check on those students can only be kept until they are enrolled in that respective educational institution but once they have passed out they are not traced, and in several negative cases the students just flee away on paying the loan.
  • In numerous cases the students even don’t deposit the fee in the educational institutions as they just deposit the initial payment so that they can enroll their name and can prove it to the banks or the financial institutions that they are using their assigned loans for their studies, but it has being reported that several students don’t pay the remaining amount to the educational institutions and consume that money for their own purpose through which they make themselves settled in any of the other country where they cannot being traced.
  • The students are given the tenure of 10 years after they have completed their education for which they have taken the loan, but it has been reported that even after the passing of the allocated time period there are several cases where the students are unable to pay the money back and is such cases the court is being involved. If the student does not have the capability of paying the loan back even the court cannot force him to pay that amount and for that purpose the student might be penalized of being arrested but the loss is on the bank and the financial institutions because although the guilty is being penalized but still they don’t have made the recovery of their money which is considered to be the loss or the bad debt as far as the financial institution is being concerned.

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