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Business Finance

Personal Loan VS Education Loan

It’s critical to understand your alternatives for borrowing for school or refinancing student loans as a college student, parent, or student loan borrower. You might be debating between private student loans and personal loan, and unsure which is better for you.

While there are some similarities between these two types of debt, there are also some significant differences. Choosing the correct form of loan guarantees that you acquire the finances you need today while also making payments that are manageable in the future.

Here’s everything you need to know about the similarities and differences between private student loans and personal loans

Difference between Personal loans and Education loans

Lesser interest rates in education loan

Interest rates for education loans are lower than personal loan interest rates. The interest rates on college loans differ depending on the loan type. Government banks charge 9 percent to 10% interest rates on secured education loans, while private banks and NBFCs charge 11.5 percent to 14.9 percent on unsecured education loans.

Requirements for good credit and borrowing available in a student loan

A credit check is frequently required as part of the loan application and approval procedure for both a private student loan and a personal loan. On the other hand, there are no credit or income criteria for a federal student loan.

Amount of money accessible

The amount available as an education loan is determined on your financial situation and the university/expenses. institution’s You can borrow up to Rs. 1.5 crore as an education loan if the lender is happy with your credit history. In the case of a Personal Loan, the amount available is solely determined by your credit history.

Moratorium period for education loan

An education loan for higher education overseas is designed to accommodate the fact that students would not be financially self-sufficient immediately after completing their studies. Most secured education loan lenders provide a moratorium period or a loan holiday to their education loan applicants to compensate for this. This moratorium is in effect for the duration of the student’s course. Students are given a grace period of six months to a year in addition to the moratorium period to allow them to find work before their repayment period begins.

Exemptions from taxes are available in education loans

From the day the student begins repaying the loan, he or she is eligible for tax benefits under section 80 E for up to eight years. It’s worth noting that only the interest portion of your income is deducted from your taxable income. Personal loans, on the other hand, do not qualify for such tax advantages.

The Bottom Line

Both student loans and personal loans have their own set of advantages and disadvantages. It depends on the borrower what particular benefits and features are you looking for. If you want no restrictions on usage of loan amount, you can go for a personal loan. However, if you have to finance expenses only related to education, you can opt for an education loan. 

Before opting for a personal loan, you should conduct effective analysis and research. This is because personal loans have comparatively a higher rate of interest. It is necessary to hunt for best personal loan interest rate. This is only possible if you have done effective research on all the prospective lenders and their offerings.

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