Many Indian students borrow money each year to pay for their higher education both at home and abroad. Many families and students who require these funds must decide between taking out a personal loan or an education loan. At first, try to be as clear as you can. You should have a clear understanding of your objective, your financial situation (both now and in the future), your planning, the risk involved, your repayment schedule, and all other relevant factors.
You’ll find it easier to weigh your options and make the best choice for you if your mind is clear. The advantages and disadvantages of the various options have a significant impact on this decision, so it is crucial to carefully consider each one.
Here are some possible deciding factors understanding which can assist you in making this important choice based on your requirements and preferences.
1) Loan amount – The eligibility requirements for personal loans vary among different borrowers and lenders, which has an impact on the 5 lakh Personal loan amount.Before making loan decisions, banks and other lending institutions take the student’s fees, expenses, and other factors into account. The amount of a personal loan a borrower can get for college will ultimately depend on their capacity to repay the debt. In addition to the funds that are obviously designated for education, additional funds may be included in this amount.
The minimum amount for an education loan is typically Rs. 50,000, though this varies between banks and institutions and can be as low as Rs. 5000 for short-term or skill courses. The most expensive sum is 1.5 crore rupees. Short courses and skill-based training can be purchased for as little as Rs. 5000. For personal loans, the maximum and minimum loan amounts are, respectively, Rs. 30–40 lakhs and you can take smaller ones too like 5 lakh Personal loan These could also vary based on the financial institutions and banks you work with and how you fulfill the criteria for a personal loan.
2) Interest rates have a big impact on the relative merits of these two options. However, this also depends on a particular applicant’s qualification for a personal loan, in addition to significantly varying between lenders.
Without a doubt, the interest rates on student loans are lower than even the best personal loan interest rates. In contrast to student loans, which typically have interest rates between 7 and 24 percent, personal loans typically have rates between 10-12% and 24 percent. In an effort to motivate female students to pursue higher education, educational loans are also provided to them at a 0.5% discount.
If they start making payments before the start of the moratorium period, the interest rate on the student loan is lowered by 1%.
3) When selecting a loan, students should pay close attention to the repayment/moratorium period. which means that the following month’s principal and interest payments will start.
Education loans shield students and their families from short-term financial hardship while also instilling in them a sense of accountability for both academic success and financial responsibility.
4) Loan duration/tenure: The EMI payment is significantly influenced by the loan’s tenure. Most student loans have repayment terms of five to fifteen years.
Some short-term or skill/training courses may be eligible for loans with shorter terms, like a year. When coupled with a lower interest rate, this leads to lower EMIs. However, getting a personal loan approved for a term longer than five years can be very difficult, and the high interest rates even if they are best personal loan interest rates, result in higher EMIs. You might be able to get a loan for a longer term or extend your current loan depending on your ability to get a personal loan, the conditions of the lender, and the features of the product.
5) Tax exemptions are available: Starting with the first loan repayment and continuing for seven years, student loans are eligible for tax benefits under Section 80E of the tax code. Student interest paid on EMIs is deductible from taxes. It will be deducted from the student’s taxable income as a result. There are no tax benefits available for personal loans whether it is a 5 lakh Personal loan or a Rs 50 lakh loan. Personal loans are therefore less advantageous than student loans.
6) Guarantor/Collateral: Parents or spouses are frequently required as co-applicants for student loans. Short-term skill or training loans do not require collateral or guarantors; they only require that the co-borrower be a parent or legal guardian. In general, a third party guarantor may be required when an education loan’s value exceeds Rs. 4 lakhs, and additional collateral may be required when it exceeds Rs. 7.5 lakhs. Because a personal loan is only based on the borrower’s income, it can be approved without a guarantor or other security.
A borrower must be self-employed as a professional or business owner, employed on a salary, or both, in addition to other requirements that vary by lender.
Education loans should be preferred over personal loans for higher education because even the best personal loan interest rates have higher rates than students loan and—most importantly—moratorium periods facility of student loan is a boon.
A personal loan should only be taken if there are no co-borrowers, guarantors, or assets to pledge as security because an education loan will not be approved in this circumstance. They might not have a co-borrower, collateral, or guarantor if they need to borrow Rs. 50,000 for a training or skill development course and earn a respectable Rs. 20,000 per month. In this case, a personal loan can be obtained since an education loan is not an option.
In conclusion, when a borrower is looking for funding for college, there isn’t usually a right or wrong answer. Numerous aspects, including your eligibility for a loan, your preferences, your capacity to repay the loan, the cost of the EMI, the length of the loan being offered, and other variables, will affect your decision. Not everyone has access to education loans, despite the fact that they have better features and lower interest rates. Many applicants consequently tend to discover themselves in need of personal loans like 5 lakh Personal loan. If you believe you might be qualified for any of these loan features, it is a good idea to compare loan features prior to selecting the best loan and lender to complete the transaction and secure the funding for your education.