We all have heard about education loan and personal loan and both also can be used for higher education. Nowadays the cost of education is going high day by day. The main thing is how one can get the best education without breaking his or his parent’s savings. Some will say educational loan. In some points, there are so many people who think that loans are taboo, but now day’s loans are considered a good tax saving instrument and also helps students to make their dream true. They can take admission in their favorite college or course without taking any stress.
Indian students are now getting the ideas of taking a loan for their education but there is one problem not many have the idea of which loan they should take. There are two choices when it comes to higher education. One is a personal loan and the other one is an educational loan.
Personal Loan– A personal loan is an unsecured loan, students and parents both can avail this loan to fund the education. The rate of interest, amount and the repayment tenure will depend on the income of the borrower, his/her credit score and in which company he or she works with. The loan applicant can be parents too if the student is not earning.
Educational Loan– A educational loan is availed by a student to fund their education. In case the loan amount is huge they are backed by their parents. The loan is availed for the purpose of the education so this loan covers the basic expenses of that course, which also can vary from bank to bank.
Students have to pay the loan from when he or she will start to earn. The parents have to repay the loan if the student failed to repay the amount.
|
Parameters |
Personal Loan |
Educational Loan |
|
Courses that are eligible |
This loan can be taken for any kind of course. |
This loan will be approved if the course is approved (India and abroad) |
|
Amount of Loan |
The loan amount depends on the applicant’s income and can be up to Rs.30 lakhs. |
If the course is on IIT or IIM the loan amount can be up to Rs.30 lakhs. It covers the basic cost of that course. |
|
Applicant |
Students or parents |
Students who are backed by parents guarantee. |
|
Requirement Margin |
None |
0-15% depending on the loan amount. |
|
Co-applicant |
Not mandatory |
Yes |
|
Third Party |
No |
Require for loan above Rs.7.5 lakhs |
|
Tenure of the Loan |
2-5 years |
7-15 years |
|
Period of Moratorium |
None |
Six months after getting the job or one month after the course got complete. |
|
Rate of Interest |
10.75%-24% |
8.6%-24% |
|
Benefit in tax |
No tax exemption |
Tax exemption is allowed for students who are paying interest. |
|
Required Document |
KYC, CIBIL, Income, and bank statement of the borrower. |
KYC, CIBIL, Income, and bank statement of the borrower, admission proofs and mark sheet of students. |
Education Loan can be ideal for students who are taking admission to reputed and approved Institutions of India but the higher loan amount will involve their parents as co-applicant.
But, the loan amount will be 85-100% of the basic cost of that study and won’t cover everything like personal expenses during the study.
When you are taking admission in IIT (Indian Institute of Technology) or IIM (Indian Institute of Management) the interest rate will be 8.5-9% but it can be high for other courses.
In some situation, the bank won’t offer the flexibility of the moratorium period.
A personal loan is handy on every perspective there are so many courses which is not listed on the list of banks approved courses. So if you want to have a degree from one of the personal loan is helpful. A personal loan covers the study cost also the cost of personal expenses.
A personal loan doesn’t need a co-applicant and it also needs a minimum document for availing this loan. The rate of interest can be low. The interest rate is starting from 10.75% which is amazing.
Both loans are helpful but it completely depends on parents and students for which one to choose. So it is advisable to evaluate both of the options before choosing. Choose that one which can fulfill your requirement completely.
