Several studies suggest that students rely on bank loans to finance their studies. Students are willingly pushing themselves from their comfort zones to go abroad for higher education and they know for a fact that it can cost a huge sum when you take other factors apart from education fees such as accommodation, tuition fees, day-to-day expenses and more. So to achieve reduced interest rates, favourable terms, and other advantages, it's critical to choose the correct source of funding for higher education. The main question arises, what sort of loan should one prefer? The choice between personal loans and education loans for paying for school is one that borrowers frequently face as both have their own merits and demerits. Let’s understand them in detail.
Education loan vs Personal loan:
Coverage of loan-
Education loan provides the biggest benefit of cost coverage where the loan quantum that borrowers can get ranges from Rs. 7.5 lakhs to Rs. 1.5 crore but may not cover your accommodation, day to day expenses, etc.
Loan repayment-
In an education loan, it's important to pick the right source of finance for higher education if you want to get lower interest rates, better terms, and other benefits.
In personal loan, there is no moratorium period offered to repay the loan. It starts from the first month.
Eligibility-
Eligibility for an education loan depends on the academic record of a student and the institute one is going to and the course he/she is opting for. If the student is unable to meet the criteria, he/she may not get their loan sanctioned.
Personal loan can be taken for any purpose, a student hereby just need to be eligible for the loan is that the primary applicant must have a credit score of more than 750 and he/she should have a stable source of income.
Interest rates-
Interest rate on an education loan starts from 8.45%-13.45% for loans. Unsecured education loans run the possibility of a higher interest rate, up to 14%.
The interest rate on a personal loan ranges from 10.5% to 24%.
Tax benefits-
Spending on studies through an education loan helps borrowers save on income tax. The interest component can be claimed as a deduction, thus lowering our taxes.
A personal loan however doesn’t enjoy any tax benefits in our country.
