In the extremely competitive socioeconomic condition in modern days, a high educational background has become essential. Since then, practically every Indian student has made it their mission to receive an education from prestigious universities around the globe. However, as education costs are becoming more and more expensive, the only option to pay for it without emptying your bank balances is to apply for loans from elsewhere.
You may now get yourself out of this situation with two different financing alternatives. Student loans or personal loans.
Thousands of students apply for higher education each year. They require a lot of financial resources in addition to improving their academic achievements. In these situations, individuals choose to go with a loan. However, it’s not as simple as it looks to get approved for a loan.
Students should be especially aware of the type of loan they are receiving, its interest rate, loan term, and repayment deadlines. Once all of these factors are taken into account, one has to check whether they are eligible for the loan.
A few specific loans require collateral, while others don’t. Let’s review the different types of loans and their details to help you grasp them better.
There are two kinds of loans that can be taken out for education:
- Personal Loan
- Educational Loan
A Brief Overview of Educational Loans vs. Personal Loans
Since there is a record demand for scholarships, international students—including those from India—have turned to loans as their primary source of funding for higher education. Students are given two main loan options, though, and it takes some time for them to choose which one best suits their short-term requirements.
What is a Loan for Education?
A loan that has been specifically created for educational purposes is known as an education loan. It cannot be used for any other reason. Because these loans are offered by government programs, banks, and even private lenders, they are very preferred by both students and working adults.
Although the majority of education loans are secured loans, the interest rates are generally low. If a borrower lacks collateral, they may still be able to obtain a loan based on a third-party guarantee. This implies that in the event that the borrower becomes unable to pay, the third party will make the loan payment on their behalf, and the loan will be approved as a result.
For higher education, there are primarily two kinds of education loans accessible.
- The Domestic student loans
- The education loan for overseas study
Obtaining an education loan has a number of advantages and disadvantages, including:
Reduced Interest Rate: The interest rate on an educational loan is relatively low and cheap because of the security involved or third-party guarantee. Additionally, as it is considered to be an exemption in return, you can claim this interest rate amount as a refund when you file your income tax returns.
Moratorium Period: This is a time frame exclusive to student loans that allows the repayment to be put on hold while the student is enrolled in courses. Even after the course is finished, students have six to twelve months to find employment before they must begin making payments. A basic interest base is used to calculate the interest. Students find these to be self-sufficient, while parents find them to be less of a burden.
Qualifications/ Eligibility Criteria: Despite an educational loan’s many advantages, there are some drawbacks as well, such as the primary issue of loan eligibility. Certain individuals are not eligible to get an education loan due to their lack of eligibility. The borrower is not eligible to receive an educational loan if they lack collateral or a third-party guarantee. They take out other loans in this situation, such as a personal loan.
A Personal Loan: What Is It?
A personal loan is an unsecured loan with variable interest rates that can be used for any purpose the borrower can think of. Due to its relative ease of application and lack of limits or qualifying requirements other than credit score, it is also frequently used in place of educational loans.
Top Personal Loan Offers in 2024
| Loan Provider | R.O.I | Processing Fees | Loan Amount | Cibil Score |
| Paysense Personal Loan | 18% – 22% (Reducing Per Annum) | 2% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Werize Personal Loan | 15% – 22% (Flat Per Annum) | 3% – 5% | 30.00 k – 5.00 Lacs | 650 |
| Money View Personal Loan | 17% – 36% (Reducing Per Annum) | 1% – 5% | 5.00 k – 5.00 Lacs | 650 |
| IDFC Bank Personal Loan | 10.49% – 22% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 40.00 Lacs | 700 |
| Incred Personal Loan | 16% – 33% (Reducing Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 650 |
| Aditya Birla Personal Loan | 12% – 28% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 50.00 Lacs | 650 |
| Finnable Personal Loan | 16.95% – 30% (Reducing Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Hero Fincorp Personal Loan | 9.5% – 16% (Flat Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Muthoot Finance Personal Loan | 14% – 22% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 7.50 Lacs | 685 |
| Upward Fintech Personal Loan | 18% – 32% (Reducing Per Annum) | 2% – 5% | 25.00 k – 5.00 Lacs | 650 |
| Cashe Personal Loan | 1.5% – 3% (Fixed Monthly) | 1.5% – 2% | 10.00 k – 4.00 Lacs | 550 |
| Finzy Personal Loan | 10.99% – 18.99% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 10.00 Lacs | N/A |
| Fibe Personal Loan | 15% – 30% (Reducing Per Annum) | 1% – 2% | 8.00 k – 2.00 Lacs | 550 |
| Faircent Personal Loan | 25% – 30% (Reducing Per Annum) | 7% – 9% | 50.00 k – 10.00 Lacs | 700 |
| Stashfin Personal Loan | 2.45% – 4% (Fixed Monthly) | 2% – 2% | 5.00 k – 5.00 Lacs | 725 |
| Tata Capital Personal Loan | 10.5% – 14.25% (Reducing Per Annum) | 0.75% – 2% | 75.00 k – 25.00 Lacs | 720 |
| Standard Chartered Bank Loan | 11.49% – 20% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 1.00 cr | 740 |
| Bajaj Finserve Personal Loan | 13.5% – 15% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 35.00 Lacs | N/A |
| Axis Bank Personal Loan | 11.15% – 16.25% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 40.00 Lacs | 690 |
| ICICI Bank Personal Loan | 10.5% – 15% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 1.00 cr | 700 |
| Fullerton Personal Loan | 14% – 32% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 25.00 Lacs | 705 |
| HDFC Bank Personal Loan | 10.25% – 16% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 1.00 cr | 700 |
| Shubh Life Personal Loan | 28% – 44% (Reducing Per Annum) | 1% – 3% | 5.00 k – 2.00 Lacs | 650 |
| Loan Tap Personal Loan | 11% – 24% (Reducing Per Annum) | 1% – 2% | 50.00 k – 7.00 Lacs | N/A |
| KreditBee Personal Loan | 1.5% – 3% (Fixed Monthly) | 5% – 6% | 1.00 k – 3.00 Lacs | 550 |
| FlexSalary Personal Loan | 1.5% – 3% (Fixed Monthly) | 300% – 750% | 4.00 k – 2.00 Lacs | 550 |
| Mpokket Instant Loan | 2% – 4% (Fixed Monthly) | 50% – 200% | 500 – 30.00 k | 550 |
| MoneyWide Personal Loan | 17% – 24% (Reducing Per Annum) | 1% – 3% | 10.00 k – 3.00 Lacs | 650 |
| Insta Money Personal Loan | 13% – 36% (Reducing Per Annum) | 1% – 4% | 5.00 k – 25.00 k | 650 |
| Kotak Bank Personal Loan | 10.75% – 22% (Reducing Per Annum) | 0.75% – 2.5% | 1.00 Lacs – 50.00 Lacs | N/A |
| Cholamandalam Personal Loan | 14% – 22% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 35.00 Lacs | 675 |
| SBM Personal Loan | 14% – 20% (Reducing Per Annum) | 1% – 4% | 50.00 k – 25.00 Lacs | 700 |
| Axis Finance Personal Loan | 14% – 16% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 50.00 Lacs | 650 |
| Shri Ram Finance Personal Loan | 13% – 16% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 25.00 Lacs | 680 |
| One Tap Loan Personal Loan | 24% – 36% (Reducing Per Annum) | 2% – 5% | 50.00 k – 5.00 Lacs | 650 |
| Credset Personal Loan | 18% – 30% (Reducing Per Annum) | 3% – 5% | 50.00 k – 5.00 Lacs | N/A |
However, to summarize the advantages and disadvantages of a personal loan:
- Personal loans are more expensive than education loans because they have higher interest rates. While education loans have an interest rate between 6.75% and 12.19%, personal loans have an interest rate between 10.5% and 21%.
- Unlike educational loans, which have restrictions on what can be done with the money obtained through them, loans have no such limitations.
- In comparison with educational loans, personal loans have no moratorium period and need repayment within a year.
- If an individual works professionally, a personal loan makes more sense than for a student who must work while still pursuing higher education.
Between a Personal Loan and an Education Loan, Which is More Beneficial?
The education loan money is deposited immediately into the financial assistance office of your educational institution. There is really no other way to use that cash for anything else. Repaying the loan amount may be challenging if you are unemployed after graduation or if your salary does not meet the necessary EMI percentage. These situations can negatively impact your credit history and cause a lot of anxiety when it comes to budgeting after completing your higher education.
However, if you also need to pay for additional expenses in addition to your education, personal loans might be a suitable choice. The loan has an adjustable payback period, a competitive interest rate, and no end-use limitations. Through Refer Loan’s platform, candidates with any credit score can apply and receive funds right away.
| Particulars | Educational Loan | Personal Loan |
| Coverage of Funds | 75,000 minimum | 50,000 minimum |
| Interest Rate | Starting 11.15% p.a. | Starting 15% p.a. |
| Tax Benefits | Under Section 80E of the Income Tax Act, 1961 | No deductions |
| Government Interest Subsidy Schemes | Interest rebate offered for interest incurred on loans above Rs 10 lakh. | No subsidy available |
| Moratorium Period | Up to one year | No moratorium period |
| Prepayment Penalty | NIL | Certain costs are calculated according to the amount of the outstanding loan. |
| Loan Tenure | Up to 84 months | Up to 60 months |
| Guarantor and Collateral | In the event of a payment default, the guarantor provides assurance that the students will make their loan installments. | No collateral or guarantor is required. |
Why Do Most Higher Education Aspirants Apply for Personal Loans to Pay for Their Educational Expenses?
Due to the essentially free tuition in nations like Germany, Indian students have been observed to choose personal loans as a means of financing their higher education. This is due to the fact that they only have to pay for living expenses while they are enrolled in college or university.
Studying overseas is not cheap. Since both parents and students are aware of this, they both have a good notion of the costs they will soon be facing. Scholarships are sought after by deserving students in order to avoid paying higher tuition and to save money on food and lodging. Some rely on loans. Since many students frequently struggle to pay for their higher education overseas.
Bottom Line
Hence, if one qualifies for an education loan, they should choose one in order to finance their further study. However, a personal loan should be chosen if the applicant is an employed professional or, in any event, does not meet the requirements for eligibility. For working professionals, it is more advantageous since they can pay the interest and EMIs with ease. However, for students, a moratorium period is necessary because it allows them to work hard on their educational goals and pay back the loan independently.
Therefore, you have discovered the distinction between an education loan and a personal loan for learners. Because of their adaptability and versatility, personal loans have grown in popularity as financial tools. Personal loans, in contrast to traditional education loans, can be used for a variety of purposes other than paying for their education.
This makes them a desirable choice for people who need money for several purposes. That is to say, when compared to educational loans, personal loans have the benefits of straightforwardness, flexibility, and favorable interest rates. Their competitive interest rates, ease of application, and unlimited usage make them a good choice for people looking for financial aid for purposes other than paying for schooling.