3 reasons why students favor education loans over personal loans.

Posted by kumarru on November 24th, 2018

A quality education is becoming increasingly expensive. So much so that deserving students often face a financial gap when attempting to pursue their further studies. In such scenarios, borrowing funds seems like the only way out. However, in order to save face, most aspirants and their parents choose not to borrow from friends and family – rather, they turn towards organized finance and more specifically to education loans.

This is a trend even though other financial offerings such as personal loans & loans against property exist in the market. There are quite a few reasons for this and this article will highlight 3 of them to ensure potential borrowers have a better picture of their options and make informed decisions when they need a financial shoulder to lean on in the future.

1. Specific to the needs of students.

Unlike other loan offerings, education loan are geared to meet the specific needs of students. For instance, one of the most important differentiators between student loans and other loans is the moratorium period. This is a feature only student loans offer under which you do not have to service the loan until you are in a financial position to do so, i.e. 6 months after you’ve completed the course or found a job, whichever of these events comes first.

Also, student loans cater to the financial needs of a student in a much more comprehensive manner. Say you were to take a personal loan - you would receive one consolidated loan amount that you’re free to use as per your requirements. However, with a study loan, you get financing at various stages of your education to ensure you never have to worry about a lack of funds. For example, most student loans will first provide pre-admission loans for you cover expenses such as entrance exams fees, visa fees, etc. Then you can also opt for proof of funds and get funds later on to cover your travel expenses, living expenses, etc.

2. Lower interest rates.

You need to avail the services of both personal and education loans – how much you pay depends on the interest rate applicable. In other words, the interest rate is like the price tag of the loan offering and education loans come with a much smaller price tag than personal loans. Where you might have to pay as much as 16-22 percent towards a personal loan, an education loan will be made available to you at interest rates ranging between 10-16 percent.

3. Repayment tenures.

Most personal loans come with tenures ranging between 5 & 7 years. Education loans, on the other hand, come with tenures of up to 10 years. Spreading out your repayment over an additional 36 years can make for much smaller EMI amounts and a more laidback repayment experience.

So there you have it, 3 of the biggest reasons why education loans take the edge over personal loans. We hope this article will help you make a smart decision if and when you ever need to borrow funds to bridge your education-related financial shortcomings. Good luck and study hard.

Also See: Education Loans, Personal Loans, Student Loans, Students Often, Loans, Loan, Education
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