Education loan and personal loan are the best options available for students who want to fund their higher education. But, comparing both the loans can be a time-consuming process.
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Discussed below are the pros and cons of both personal loan and education loan:
Loan Amount: Loans are sanctioned based on the credit score and financial standing in case of a personal loan. An education loan is sanctioned based on the estimated expenditure required to complete the course. The funds availed can only be used for education-related expenditure and not any other purpose.
Moratorium Period: Personal loan repayment starts immediately after the loan is sanctioned. An education loan offers a moratorium period that reduces the immediate burden of the loan repayment after the completion of the course. So a student can start paying the loan EMIs a year after the completion of the course or 6 months after getting a job, whichever is earlier.
See Also: Tax Benefits on Education Loan
Interest Rate: The rate of interest on a personal loan is higher than education loan.
Loan Tenure: The maximum repayment tenure of a personal loan is 5 years, whereas the maximum tenure of an education loan is 8 years.
Collateral: Personal loans are collateral-free loans. However, an education loan requires a guarantor (parent/ spouse) if the sanctioned amount is above Rs 4 Lakhs.
Tax Benefits: The borrower can avail tax benefits on an education loan. No such benefits can be availed on a personal loan. You get a tax deduction under Section 80E on the education loan interest up to any limit.
See Also: How to Get a Student Loan?
See Also: Personal Loan For Students
The final choice is yours. If you opt for a personal loan, then you can cover other expenses like food, accommodation and travel. However, the repayment starts immediately. If you avail an education loan, then you get it at a lower interest rate and you will have the flexibility in repaying the loan.
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