✓ Benefits Of Education Loan
✓ Comparison Between Personal and Education Loan
Students planning to study abroad often think about how will they fund their education abroad, since pursuing higher education abroad is not a cheap affair.
Hence, a lot of students seek out reliable options to finance. And an abroad education loan is considered by many to be one of the reliable sources of higher education funding. However, one of the biggest flaws of the entire education loan process is the fact that it sometimes takes longer to get the education loans sanctioned, or sometimes students do not deem eligible for the education loan as per the eligibility criteria.
As personal loans are granted quickly and have few qualifying requirements, students who are in immediate requirement of higher education funding, often borrow personal loans.
This article aims to elaborate on the different ways in which an education loan benefits students who wish to study abroad and how personal loans are not a viable option for higher education abroad.
This topic is at the center of discussion in the latest episode of Loanflix Inshorts, which is given below.
A personal loan basically refers to an amount of money that is borrowed by individuals to fulfill their personal needs. The reason for borrowing a personal loan can vary depending on the individual’s need at the time of applying. Personal loans can be used to meet a variety of expenses including funding higher education.
One of the biggest benefits of borrowing a personal loan is the fact that candidates are not required to pledge anything against them. These loans are unsecured loans that are granted by lenders after considering factors such as the applicant’s income, credit, financial history, the capability of repayment, etc.
However, personal loans have the highest interest rates due to the amount of risk involved in the entire process and these are not a suitable funding option for long-term expenses. Personal loans are repaid in installments and candidates are not allowed any moratorium on the repayment of the same.
Education loans are a type of loan used to fund studies. One of the highlights of any education loan is a student getting a moratorium period.
Several lenders have several education loan schemes which cater to the financial needs of various groups of students. Education loans can be utilized to fund both education abroad, as well as within India. These loans are bifurcated into two different categories on the basis of the requirement of collateral security for education loans, which is-(Click on the type of loan to read in detail)
Reason 1
When it comes to choosing the right education loan, students and parents often tend to opt for secured education loans provided by government banks because of the numerous benefits they offer.
However, the process of obtaining secured education loans can be a long one for all applicants, as it involves the pledging of collateral security requiring legal and valuation of the property, and every government bank has set its own set of rules and regulations regarding the type of assets that can be pledged by the borrowers.
This is what hinders students from choosing secured education loans to finance higher education as it is at this point that students turn to alternative options like personal loans to fund higher education.
Reason 2
There is another point that students, especially those who wish to study in countries like Germany, Canada, Australia, and New Zealand need to keep in mind. All of the countries which are mentioned above, require migrant students to deposit a certain amount of money which could either be used towards their tuition fees or living expenses, even before their visa process begins. This disbursement of higher education funding before the visa process is referred to as the pre-visa disbursement process.
Now, when students approach their respective government bank lenders, a lot of officials, due to their lack of knowledge regarding the respective education loan product, often mislead these students by telling them that it is impossible for them to approve such disbursements in the absence of a visa and that they should try borrowing a personal loan instead to finance higher education. This is the second reason why many students end up borrowing personal loans to finance higher education abroad.
Reason 3
For an abroad education loan, students and their co-applicants have to meet specific eligibility parameters set by lenders. And not everyone can be eligible for education loans as these eligibility criteria are very stringent.
Lenders are very particular about the types of courses, countries, age of the students, financial profile of the co-applicants, etc for which they would fund.
In comparison to education loans, personal loan eligibility is significantly less strict. If you have a good CIBIL record, you can just as easily get a personal loan.
Reason 4
Students who wish to study in countries like Germany, where universities charge close to zero tuition fees, students are only required to fund their living expenses. When such candidates approach government banks for secured education loans, many a time, due to the lack of awareness of the various education loan features, officials often tend to misguide them by advising them to fund their education abroad with the help of personal loans.
It is very important to note that funding higher education abroad with the help of a personal loan is never recommended by experts. This is because personal loans do not cover any of the benefits (mentioned Below).
Here are a few of the many benefits which are exclusively applicable to the borrowers of abroad education loans.
To provide relief to students who have taken education loans through a financial institution in India i.e. banks or NBFCs, the rate of TCS shall only be 0.5% on amounts exceeding Rs 7 lakh. And the best part is the whole amount of TCS can be claimed back.
This however is not applicable to a personal loan.
All of the above-mentioned benefits are applicable only to candidates who borrow education loans to fund their higher studies in India or abroad.
The below table will give you a rough comparison of personal loans vs education loans with respect to certain common terms. This will help you get a better idea of funding your education abroad with the help of education loans is a better option as opposed to opting for personal loans.
Loan Parameter |
Education Loan |
Personal Loans |
Interest Rates |
Secured: 8.5% to 11% Unsecured: 11% to 14% |
10% to 16% |
Total Loan Tenure |
10 years to 15 years |
1 year to 5 years |
Total Education Loan Amount |
Secured: up to INR 1.5 Cr Unsecured: up to INR 1 Cr
|
INR 25 Lakhs |
Moratorium Period |
Yes |
No |
Flexible Disbursements |
Yes |
No |
Grace period |
Yes |
No |
When students directly approach banks for inquiries regarding the abroad education loan process, most of them are given only partial information regarding the same.
The financial team of WeMakeScholars has sufficient knowledge about the abroad education loan process due to their experience in tackling even the most complicated cases. As a result, close to 30000+ students have benefited from the services.
Also, most students who have planned their higher studies in countries like Germany and Canada are mostly concerned about their pre-visa disbursements from government banks as many of these banks are often not aware of the education loan provisions for these countries as a result, delaying the pre-visa disbursement.
When you apply through WeMakeScholars, our financial officers ensure that this does not happen and often try their level best to get such loans sanctioned well in time.
Why should I consider taking out an education loan instead of a personal loan for my higher education expenses?
An education loan is specifically designed for financing higher education expenses, such as tuition fees, books, and living expenses. Although personal loans can also be used for education expenses, they tend to have higher interest rates and shorter repayment periods. In contrast, education loans usually offer lower interest rates and longer repayment periods, making them a better option for funding higher education.
How much money can I expect to receive if I apply for an education loan to finance my education?
The amount of money you can receive from an education loan depends on several factors, including the course fees, living expenses, and collateral provided, if any. In India, education loans can typically range from Rs. 7.5 lakhs to Rs. 1.5 crore for education abroad or even study in India.
What kind of eligibility criteria do I need to meet to qualify for an education loan?
The eligibility criteria for education loans may vary depending on the lender. Generally, you should be a citizen of the country, have secured admission to a recognized educational institution, and have a good academic record. Your parents or guardians should also have a good credit score and income to act as co-borrowers. For further inquiry get in touch with our Financial Officers.
Are there any ways to negotiate the interest rate on an education loan?
Yes, it may be possible to negotiate the interest rate on an education loan by presenting a strong academic record, demonstrating a good credit score and income of co-borrowers, or providing collateral. WeMakeScholars experts are dedicated to providing full negotiation support to its students. Just raise a callback request.
Can you explain the key differences between education loans and personal loans for higher education?
The primary difference between education loans and personal loans for higher education is that education loans are tailored to meet the specific needs of students seeking higher education. Education loans have lower interest rates and longer repayment periods compared to personal loans, which can help students manage their finances better while they focus on their studies. Additionally, education loans often offer flexible repayment options, such as moratorium periods, EMI payments, tax benefits under section 80 E, and TCS Benefits.