Education Loan vs. Personal Loan: Which is the Right Choice for Higher Studies Abroad?

Dreaming of studying abroad but unsure which loan to choose? You're not alone! Many students face this dilemma and without the right information they can end up with a loan that adds more challenges than support in the long run.

But don't worry; we're here to make things easier. Today, we'll walk you through a simple comparison of two popular loan options for studying abroad: Education Loans and Personal Loans for higher studies abroad. By the end, you'll have a clearer picture of which one best matches your needs.

But before delving into the specifics, let's quickly refresh your memory with a brief overview of these loan options.

Understanding Overseas Education Loans

An overseas education loan helps students who want to study in another country by covering tuition, living expenses, and travel costs. It can come with or without the need to provide security like property or savings. But loans without such security often have higher interest rates.

Many banks and financial institutions offer these loans, giving students a moratorium period before they start paying it back, usually after finishing their studies. The details like how much you can borrow, and the interest rate depend on the lender and the applicant’s situation.

Understanding Personal Loans

A personal loan is a loan from banks or credit unions without putting up any assets as collateral. This makes it different from other loans that require security, like a house or a car. People often use personal loans for various reasons, such as covering medical expenses, renovating their homes, or even paying for education.

You repay the loan through fixed monthly payments over a set period, usually with a consistent interest rate. While the interest rates might be higher than overseas education loans, the flexibility of personal loans makes them an attractive option for those who need quick cash.

Now that we've covered the basics, let's take a closer look at the main features of these loan types and compare them.

Education Loans Vs. Personal Loans For Abroad Studies - Comparative Analysis

Are study abroad loans entirely different from personal loans for education, or do they have some similarities? Let’s explore this ahead.

Criteria	Education Loans	Personal Loans
Maximum Loan Amount	The maximum loan amount for studying abroad typically ranges from Rs.7.5 lakh to over Rs. 2 crore., depending on the lender, the borrower’s creditworthiness, and the total cost of education.	The maximum loan amount for personal loans usually ranges from Rs. 5 lakh to Rs. 40 lakh, depending on the lender, the borrower's income, credit score, and repayment capacity.
Interest Rates	Typically, lower interest rates (starting from 9% per annum) as they are designed to support students. Some government-backed loans even offer concessions.	Generally higher interest rates (starting from 11.45% per annum) as these are unsecured loans and banks consider them riskier.
Collateral Requirements	Public banks typically require collateral for offering higher loan amounts, though there are a few exceptions. On the other hand, private banks and NBFCs often provide unsecured loan for education, but these loans generally come with higher interest rates.	Generally, do not require collateral, making them easier to access for those without assets to pledge, but this results in higher interest rates.
Processing Time	Typically, 7-10 working days.	Quicker processing and disbursement, as it doesn't require proof of admission or course details.
Loan Amount Coverage	Covers a wide range of educational expenses, including tuition, living expenses, travel, and study materials. Some banks even cover exam fees and insurance.	No restrictions on loan usage, so it can be used for any expenses, including travel, accommodation, and miscellaneous costs, but often not as well-tailored for academic needs.
Repayment Start	Comes with a moratorium period (grace period), allowing repayment to begin 6-12 months after course completion or upon securing a job.	Repayment starts immediately after loan disbursement, with no grace period, which could add financial pressure during studies.
Tenure	Longer repayment tenure, typically up to 10-15 years, providing a lower EMI burden.	Shorter repayment tenure, usually between 1-5 years, leading to higher monthly EMIs.
Tax Benefits	Eligible for tax deductions under Section 80E of the Income Tax Act (in India), where the interest paid can be deducted from taxable income for up to 8 years.	No tax benefits available. The entire repayment, including interest, is borne without any tax deductions.
Eligibility	Requires admission confirmation from a recognized institution and a guarantor or co-borrower. Some banks have restrictions on the type of courses or institutions.	No specific educational requirements. Eligibility is based primarily on the borrower’s income, credit score, and banking history.
Suitable For	Ideal for students focusing on long-term financing with structured repayment options and those looking to avail of tax benefits.	Suitable for students needing quick funds or those with existing sources of income to manage immediate repayment without a moratorium.
Acceptance of Loan Letter	Loan letters are accepted directly by the visa officer.	Loan letters are not accepted by the visa officer. The amount is directly disbursed in student/ co-borrower’s account.

Clearly, personal loans serve a different purpose than education loans for abroad studies. But does this mean that study abroad loans are better than personal loans for pursuing higher studies abroad? With that question in mind, let's turn to the ultimate conclusion of our article.

Education Loans Vs. Personal Loans for Abroad Studies – Which One is Better?

The answer to this question is clear. If you need a loan that caters to your study abroad needs, overseas education loans are your best option. With higher loan amounts, lower interest rates, a moratorium period, extended repayment terms, and other favorable features, you can attend your dream university and live comfortably without the stress of repaying the loan during your studies.

If you're ready to apply for a study abroad loan, your first step should be to connect with Élan Overseas Education Loans. Our team will help you find the best funding options tailored to your needs, eligibility & suitability. For example, if you're looking for a lower interest rate without collateral, we will provide you with an education loan interest rate comparison between various financial institutions to help you make the best choice.

So, reach out to our team without any delay!