Education Loan Vs Personal Loan for Studies Abroad

Posted by Rita Biswas on September 16th, 2019

Aspiring to study abroad?

Well, that’s a great decision as it’s going to open new academic avenues for you.

Are you worried about the finances?

You don’t have to be, as banks as well as NBFCs provide student loans for studying abroad which cover majority of the expenses for higher education overseas. You can surely opt for Personal Loans as well but opting for Educational Loans is comparatively much beneficial.

Loan Amount:
The loan amount and its approval are always a challenge. Now, in case you want to take a Personal Loan, the bank usually gives a loan ranging from 5 to 10 lakhs only. On the other hand, if you try for an Education Loan the bank usually sanctions the complete required loan amount i.e. the total cost of education of the borrower against the collateral property.

Which means that you can get the complete amount required for your higher education overseas only if you opt for an Education Loan and not through the Personal Loan.

Loan Repayment Tenure:
The tenures for both personal loan and Education Loan also vary significantly. The repayment tenure for Personal Loan is between 5 -10 years, whereas, for an Education Loan, the minimum repayment tenure is 15 years, thus making it comfortable for the borrower to repay the amount. 

Interest Rate:
When we talk of ROI, there is a drastic difference between the ROI on Personal Loan vs Education Loan. The ROI on Personal Loan is 15% and above, whereas for an Education Loan it ranges from 9.50% to 10.50% making it conducive for the borrower.

Equated Monthly Instalment (EMI) Value:
EMI value is the amount the borrower repays the bank based on the loan. The value of EMI differs between Personal Loan and Education Loan. It is a simple logic of lesser the loan tenure higher the EMI value and higher the loan tenure lesser the EMI value. 

Tax Benefits:
If a student opts for an Education Loan, then the borrower gets the tax benefit yearly, if he/she pays the monthly simple interest during the moratorium period. Whereas, there is no tax benefit for a Personal Loan.

Moratorium Period:
A moratorium period is a time during the loan term when the borrower is not required to make any repayment and only Education Loans have this feature.

In Personal Loan, the borrower has to start the loan repayment immediately from the next month once the loan is disbursed, through EMIs unlike in Education Loan.

The moratorium period for an Education Loan is the sum of the study period (1 – 2 years) plus job search period (6 months to 1 year depending on banks), i.e., the borrower will begin paying the EMI only after education and job search period is completed, thus making it convenient for the borrower. 

Processing Fees: 
Banks charge a stipulated amount from the loan borrower as a processing fee. There is a negligible processing fee for an Education Loan whereas the processing fee for Personal Loan is comparatively high. 

So, what do you feel? Is it good to go for an Education Loan or a Personal Loan?

Just in case you need further assistance for overseas education loan process you can visit Overseas Education Consultants who also provide end to end services for education loans.

Don’t give up on your dream of studying abroad, go for it.

All the best!

Related URL:

Smart Tips to Manage Your Overseas Education Loan Repayments