Personal Loan for Students vs Education Loan: Which is better?

Posted In education loan On May 29, 2019
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What is a personal loan?

In order to fulfil your day-to-day financial needs, personal loans are taken which don’t require any sort of collateral or security deposit. The funds obtained from a personal loan can be used as per your choice like travel expenses, medical costs, home renovation, etc. In order to avail a personal loan, you must have a regular source of income. The bank also considers other points such as creditworthiness, previous loan history, etc.

What is an Education loan?

The loan taken only for Educational purposes of the individual is referred to an Education loan. It covers basic expenses of education such as accommodation, mess charges, tuition fees, etc. For this type of loan, a co-signer is mandatory irrespective of the loan amount taken. In order to be eligible for the loan, one must have guaranteed admission to a Government of India accredited college.

Education loan vs personal loan can be explained in the following ways:

  1. A personal loan is generally granted to customers at a higher rate of interest as compared to an Education loan.

  2. The repayment of Education loan starts at a moratorium period but no such time period is provided to the ones taking a personal loan.

  3. The repayment period usually ranges from a period of 10-12 years with a maximum limit of 15 years while a personal loan repayment period doesn’t exceed beyond 5 years period.

  4. The loan granted is generally of an amount ranging up to 25 lakhs while an Education loan can be of any amount depending upon the course fees of the institute.

  5. Interest benefit under section 80E of the income tax benefit can be availed when an Education loan is obtained while personal loans aren’t eligible for tax benefit.

  6. Loans above 7 lakhs require a third person guarantor in case of an Education loan while personal loans don’t require any guarantor.

Banks today approve almost all possible Educational loans for government approved courses. Thus, from the career perspective of the individual, an Educational loan is definitely a better option as compared to a personal loan for students.


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