In India, many students are willing to pursue higher education in foreign countries to create a better future for themselves and their families. However, pursuing education abroad is costly, including tuition fees, travel expenses, living expenses, supplies, and other related expenses.
For covering all expenses of living in a foreign country, the first choice that comes to mind is an education loan vs personal loan for collecting financial resources.
What is an Education Loan?
An education loan is a financial product provided by banks and NBFCs to students seeking to pursue higher education in India or abroad. It includes all expenses, such as tuition fees, exam fees, book expenses, travel expenses, hostel charges, and other related costs.
Key Features
- This type of loan is specialized for students who are willing to take higher education.
- It can be given without bringing any valuable collateral as security, depending on the loan amount.
- It also provides students with the opportunity to study in recognized institutions or courses.
- For applying for a loan, usually, parents or guardians need to agree with the student.
Reason to Choose
- Offers the chance to higher education, especially abroad.
- Your required fund amount is larger than the amount preferred for an educational loan.
- The repayment duration is long, and the EMI amount is lower.
- Tax benefits are provided under section 80E on interest payments.
Platforms:
| Banks/NBFCs | Interest Rate (P.A.) | Tenure | Amount Range |
| State Bank of India (SBI) | 8.15% – 10.50% | Up to 15 years | ₹1.5 Crore |
| HDFC Credila | 9.25% – 13.00% | Up to 12 years | No upper limit (depends on course/institute) |
| Axis Bank | 13.70% – 15.20% | Up to 15 years | ₹40 lakh |
| Punjab National Bank (PNB) | 8.90% – 10.25% | Up to 15 years | ₹1 crore |
| Avanse Financial Services | 11.00% – 13.00% | Up to 10 years | ₹75 lakh+ |
| IDFC FIRST Bank | 9.50% – 13.00% | Up to 10 years | ₹50 lakh |
| ICICI Bank | 10.50% – 12.00% | Up to 10 years | ₹50 lakh |
| InCred Finance | 11.75% – 16.00% | Up to 10 years | ₹40–60 lakh |
What is a Personal Loan?
A personal loan is an unsecured loan used for any individual matter, like household expenses, or even for educational purposes. Still, unlike an education loan, there is no need to specify the use of the loan.
- Key Features
- There is no restriction on the usage of loan amounts; for example, education loans can be used solely for education-related expenses.
- In a personal loan, there is minimal documentation required as basic information about the borrower.
- Loan amount disbursement is quick, taking 23 hours to 48 hours.
- In the procedure of a personal loan, there is no requirement of collateral because it is an unsecured loan.
- Personal loans can be given to any salaried and self-employed person as long as they are eligible forthe loan offer.
- Reason to Choose
- In a personal loan, funds can be quickly raised with minimal documents required to prevent the process of lengthy documentation, which occurs in educational loans.
- A personal loan should be taken out if the borrower needs a small or moderate loan.
- If a borrower has a source of stable income and also a good credit history, then a personal loan is easy to approve for loan.
- If the borrower does not want to give any valuable asset for collateral as security, then a personal loan is better because in education loan collateral varies depending on the loan amount.
Personal loans should be used for the need of funds for short-term or any expense that is not covered in an education loan vs personal loans can be used to cover that expense.
Platforms:
| Banks/NBFCs/Fintech Apps | Interest Rate (P.A.) | Tenure | Amount Range |
| HDFC Bank | 10.50% – 21.00% | 1 – 5 years | ₹50,000 – ₹40 Lakhs |
| Axis Bank | 10.49% – 21.00% | 1 – 5 years | ₹50,000 – ₹40 Lakhs |
| Kotak Mahindra Bank | 10.99% – 24.00% | 1 – 5 years | ₹50,000 – ₹25 Lakhs |
| ICICI Bank | 10.65% – 16.00% | 1 – 6 years | ₹50,000 – ₹25 Lakhs |
| KreditBee | 16% – 29.95% | 3 months – 2 years | 3 months – 2 years |
| Navi | 9.90% – 36.00% | 3 months – 6 years | 3 months – 6 years |
| PaySense | 15% – 36% | 3 months – 5 years | ₹5,000 – ₹5 Lakhs |
| EarlySalary | 18% – 30% | Up to 2 years | ₹5,000 – ₹5 Lakhs |
Personal Loan : Aditya Birla Personal Loan Apply Online & Eligibility, Interest Rate
Education Loan Vs Personal Loan
| Basis | Education Loan | Personal Loan |
| Purpose | Specifically for educational loan | Can be used for any purpose |
| Interest Rate | 8% to 12% (Approx) | 10% to 36% (Approx) |
| Tax Benefits | Provide under section 80E of IT Act | No tax benefits |
| Loan Tenure | Up to 15 Years | 5 to 6 years |
| Moratorium period | Course Duration + 6 months to 12 months | Repayment start immediately |
| Collateral | Required for higher loan amount | No required |
| Co applicant | Usually Mandatory | No required |
FAQs
Education Loan vs Personal Loan, which one is the right choice for higher education?Â
The Education Loan provides funds at a lower interest rate with a long tenure period so if you are planning for higher studies, especially abroad, then surely go for it, but if you have an urgent need for short-term money, then a personal loan will be a considerable option.Â
Will I get any tax benefits for education purposes on a personal loan?
No, generally, the personal loan doesn’t offer any type of tax benefits, but if you want, then you should choose an educational loan because under Section 80E, you’ll get tax deduction on interest.
