The cost of quality education combined with increasing educational aspirations is quite expensive. Thus, dependence on loans, especially personal loan to finance higher studies has paved the way for many. The cost of education in India ranges between Rs.5 lakh to Rs.20 lakh, depending upon the course, college or institute. And, this cost goes up when a student moves to a foreign country for higher education. So, a personal loan for higher education with plenty of remarkable features like-no collateral,minimal documentation, instant approval and fastest disbursal is an ideal option as compared to an education loan. It also covers all educational expenses such as rent, tuition fee, food, transportation, books, etc.unlike an education loan, which has restricted use.
Personal Loan v/s Education Loan-Which One is Better
With the easy availability of both the loans, being offered by many banks and NBFCs, it is surely a difficult choice to make. Let’s compare them on plenty of crucial parameters and find out how a personal loan is better.
1. Multi-purpose Loan: A personal loan is a multi-purpose loan, which means a borrower can avail the same to meet any need. And, in case of pursuing higher education,a personal loan can be a helping hand here. Education loan is available to pay college and hostel fee to pursue professional courses such as engineering, medical and management courses. Incase of personal loan, disbursal is into borrowers account whereas in education loan, the payment will be made to college directly.
2.No Collateral/Security: As the personal loan is an unsecured loan, thus a borrower doesn’t need to give a collateral/security to avail the maximum loan amount from the lenders. Here, a credit/cibil score coupled with a credit history of a borrower is important. Being an unsecured credit, The lender considers eligibility criteria before giving instant personal loan approval.
Whereas, in case of a higher education loan, a co-applicant (parent, spouse or sibling) is a must to avail the loan. Also, if the loan amount reaches beyond Rs.7.5 lakh, an applicant needs to give a collateral/security or a third-party guarantor to the lender.
3.Online Instant Approval & Disbursal: An instant online approval and disbursal add additional value for a personal loan. Soon after meeting the required eligibility criteria, an applicant can get instant approval. And, the loan amount also gets disbursed quickly in the respective account of a borrower, in contrast to education loan.
4.Minimal Documentation: An applicant needs to submit fewer KYC documents to get a personal loan online. With minimum documentation, the process of getting the required loan amount becomes really quick to meet the educational needs. Also, minimal documentation means less scope of skipping any documents, which leads to less loan rejection. While on the other hand, the documentation list is quite lengthy in case of an education loan. Hence, the loan rejection probability is higher here, in case of missing any document.
5.A Full Coverage Loan:Personal loan gives full coverage by bearing all educational expenses. Yes, apart from using personal loans to finance higher studies, an applicant can also use the money for rent, tuition fees, food, transportation, books, flight tickets etc. While in education loan, additional educational expenses are not covered.
How Personal Loan Can Be Availed at Lower Interest Rates
A borrower can get a personal loan at a lower interest on meeting the required eligibility criteria for personal loan for higher education.
|Minimum Income||Rs.20,000 monthly (non-metro cities), Rs.35,000 monthly (metro cities)||Rs.2 lakh(annual)|
|Credit/Cibil Score||Above 700(out of 900)||Above 700(out of 900)|
|Minimum Job/Business Stability||1-2 Years||2-3 Years|
|Minimum Work/Business Experience||1-2 Years||3 Years|
|Minimum Profit After Tax||NA||Rs.1-2 lakh(annual)|
However, availing a personal loan at attractive interest rates would be a smooth sail, if an applicant:
- Is a Salaried Professional, working in leading MNCs(CAT A or CAT B), or a Government Employee.
- Has higher income and less/no financial liabilities(existing loans/credit cards,insurance policy).
- Is good at savings or like to invest in saving instruments like PPF, FD, Mutual Funds( SIPs),etc.