Higher studies have become an essential aspect for people who want to move up the ladder. Whether you are a working professional who wants to up skill, or you are just a student who wants to pursue higher studies, such courses come at a high cost. You may want to consider taking a loan to help you finance your studies. You are then left with two options: to apply for a personal loan or an education loan. But which one to choose and how?
Let us weigh the pros and cons of both these loans, which can then help you make an informed decision.
What is a Personal Loan?
A Personal Loan is an unsecured loan that you can use for any type of financial crunch. It does not involve any collateral.
Pros & Cons of a Personal Loan
Pros
- Multipurpose
A personal loan can be used for any purpose. You do not have to specify the purpose of taking a personal loan to the lender. You can use it to cover other expenses than just the school or college fees. You can add additional costs such as travelling, accommodation, books, etc.
- Faster Loan Approval and Disbursal
Owing to personal loan apps and also online application, you can get faster loan approval. It is important to note that instant personal loan is only possible if you fulfil the eligibility criteria.
Cons
- Moratorium Period
Unlike education loan, the EMI payments for personal loans start as soon as you avail it.
- Tax Benefits
There are no direct tax benefits on a personal loan.
What is an Education Loan?
An education loan is a sum borrowed by a lender to finance college or school-related expenses.
Pros & Cons of an Education Loan
Pros
- Grace Period for Repayments
With an education loan, you get a moratorium period. This means that your loan repayment starts 6 or 12 months after your graduation.
- Low-Interest Rates
Education loans offer a lower rate of interest as compared to a personal loan. A government-subsidized loan can further lower the personal loan interest rate.
- Tax Benefits
Tax benefits are offered for a student loan under section 80E of the Income Tax Act.
Cons
- Only Useful For Paying Course Fees
The funds from an education loan get directly transferred to the college’s financial aid office. This means you cannot use the funds for any other expenses.
- Collateral/Guarantor
Depending on the loan amount and the criteria set by the lender, when you take an education loan, you might have to keep collateral or need a co-applicant.
From the above pros and cons of both a personal loan an education loan, we can deduce that the type of loan you choose depends on your requirement. If you want to incur other expenses than just the course fees, then you may want to consider taking a personal loan. If you only want a loan to pay the fees, then you can consider taking an education loan or as it is also known as a study loan.
Money Control Finance 