Nowadays, students are not only smart and talented but also have the potential to push themselves beyond their comfort level and do remarkably well in all fields. But, one of the most prominent difficulties that stand between students and their goals today is the increasing cost of education. Parents can take the help of both an education loan and a personal loan to cover all the educational expenses without any hassle.
But deciding between personal and education loans to support your child’s education is a difficult task. Letts’s have a look at both the options and find out what works better based on your requirement-
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Interest Rates
Personal loan interest rates are quite competitive. There are various lenders in markets that offer a personal loan at a low-interest rate based on your credit history and monthly income. Whereas, the interest rate of an educational loan ranges between 7.95 per cent to 15.2 per cent per annum.
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Loan amount
Lenders finalize the loan amount after analyzing your financial condition. The loan amount for an education loan can vary from Rs. 50,000 to Rs. 2 crores. And, if you go for a personal loan for education, the loan amount may range from Rs. 50,000 to Rs. 50 lakhs. So, you can quickly get a considerable amount without any hassle. A personal loan can also cover other expenses such as the cost of external coaching, accommodation, food, etc. which is not in the case of an education loan.
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Documentation
Availing a personal loan doesn’t require you to get any verification regarding your education. Thus the entire application process is hassle-free and requires minimal documentation, Whereas, in the case of an education loan, you need to get numerous documents verified. Such tedious documentation leads to the lengthy application process.
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Tax benefits
Under section 80 E, education loan provides tax benefits from the day the student starts repaying the loan amount for a maximum duration of eight years. Only the interest component is subtracted from the taxable income. However, no such tax exemptions are available on personal loans. But, many lenders offer exclusive benefits which can turn out to be extremely beneficial for the borrower.
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Guarantor/ collateral:
If you opt for an education loan, you require a co-applicant like a parent or a spouse and a third-party guarantor may also be needed when the education loan amount exceeds Rs.4 lakhs. However, the personal loan requirements are relatively less as compared to an education loan. A personal loan is an unsecured loan. It does not require a guarantor or any collateral security to avail it. So, the borrower does not need to give up any collateral like gold or property to apply for a personal loan. In case you default the loan, the lender cannot auction any of your assets.
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Loan tenure
You can avail a personal loan with a repayment tenure ranging from 12-60 months. Personal loans available come with attractive features such as flexible repayment options, and unlimited withdrawal. Education loan usually offers a longer loan tenure that can go up to 20 years. It might be beneficial to those who want a longer time for repayment. But, if you do not wish to commit to a loan for a long duration, then a personal loan is the most suitable for you.
Conclusion
Now, that you have all the information required for both the loans with a brief comparison, you can analyze well and choose the one that meets your requirements. However, a personal loan can be a favourable option as you can use it to cover multiple expenses apart from just education. With a personal loan, you will also be able to handle your daily payments without any trouble. And, you can also customize your loan according to your requirements.
