By What is a personal loan?-
In order to fulfill your day-to-day financial needs, personal loans are taken which don’t require any kind of collateral or security deposit. The funds obtained from a personal loan can be used as per your choice like travel expenses, medical costs, home renovation, etc. In order to avail of a personal loan, you must have a regular source of income. The bank also considers other points such as creditworthiness, previous loan history, etc.
What is an Education loan?-
The loan taken only for the Educational purposes of the individual is referred to as an Education loan. It covers basic expenses of education such as accommodation, mess charges, tuition fees, etc. For this type of loan, a co-signer is mandatory irrespective of the loan amount taken. In order to be eligible for the loan, one must have guaranteed admission to a Government of India accredited college. If you want to know more about Education Loans then click on Interest-Free Education Loans and you can get all types of information by visiting our website.
Education loan vs personal loan can be explained in the following ways:
- A personal loan is generally granted to customers at a higher rate of interest as compared to an Education loan.
- The repayment of an Education loan starts with a moratorium period but no such time period is provided to the ones taking a personal loan.
- The repayment period usually ranges from a period 10-12 years with a maximum limit of 15 years while a personal loan repayment period doesn’t exceed beyond 5 years period.
- The loan granted is generally of an amount ranging up to 25 lakhs while an Education loan can be of any amount depending upon the course fees of the institute.
- Interest benefit under section 80E of the income tax benefit can be availed when an Education loan is obtained while personal loans aren’t eligible for tax benefit.
- Loans above 7 lakhs require a third person guarantor in case of an Education loan while personal loans don’t require any guarantor.
Banks today approve almost all possible Educational loans for government-approved courses. Thus, from the career perspective of the individual, and Educational loan is definitely a better option as compared to a personal loan for students.
See the table to know how much you can borrow from the bank or NBFC for a personal loan and education loan in India.
| Bank/NBFC | Maximum Personal Loan | Maximum Education Loan |
|---|---|---|
| SBI | INR 20 lakh | INR 1.5 Crore |
| HDFC Bank | Depend on your income and credit score | 20-30 lakh |
| Bajaj Finserv Ltd. | INR 25 lakh | INR 1 Crore |
| Tata Capital | INR 25 lakh | INR 25 lakh |
| Axis Bank | INR 15 lakh | INR 75 lakh |
| ICICI Bank | INR 40 lakh | INR 1 Crore |
| Kotak Mahindra Bank | INR 20 lakh | INR 20 lakh |
| YES BANK | INR 40 lakh | Need-based |
| RBL Bank | INR 20 lakh | INR 10-20 lakh |
| Standard Chartered Bank | INR 30 lakh | INR 80 lakh |
| Federal Bank | INR 25 lakh | INR 10-20 lakh |
Interest Rate
The interest rate ranges between 8.30% to 20% on education loans whereas the personal loan rate ranges between 10.99% and 24%. Girl students can get an interest rate concession of 0.50% on their education loans. See the table below that compares the rates of the two loans.
| Bank/NBFC | Personal Loan Interest Rate (per annum) | Education Loan Interest Rate (per annum) |
|---|---|---|
| SBI | 9.60% – 13.60% | 6.90% – 9.30% |
| ICICI Bank | 10.50% onwards | 11.25% – 11.75% |
| Axis Bank | 10.25% – 21.00% | 13.70% – 15.20% |
| Kotak Mahindra Bank | 10.25% Onwards | 12.33% – 16.00% |
| HDFC Bank | 10.25% – 17.00% | 9.25% – 13.68% |
| RBL Bank | 17.50% – 26.00% | 14.15% – 16.15% |
| Standard Chartered Bank | 11%-12.50% | 7.40% – 9.40% |
| Tata Capital | 10.49% – 14.25% | 10.99% |
| YES BANK | 10.49% Onwards | 12.00% – 14.00% |
| Punjab National Bank | 8.95% – 14.00% | 6.90% – 9.55% |
Guarantor & Collateral
Education loans up to INR 7.5 lakh can be approved without any collateral. But beyond that, collateral will be required and here the parents will need to be co-applicants. The collateral can be in the form of a fixed deposit, house property, life insurance policy, etc. Whereas, in a personal loan, there’s no requirement of collateral. If parents have the required income to pay the applicable EMI and have a good credit history, the loan can be sanctioned. So, it’s clear which of the two – personal loan vs education loan – is better in terms of ease in approval and flexibility
Conclusion
In the personal loan vs education loan discussion so far, one must have got the basic idea of these two products. While personal loans can be financed without collateral, unsecured education loans are granted upto INR 7.5 lakh only. Plus, education loans above INR 4 lakh are not financed fully. Personal loans can be offered up to INR 15-25 lakh on average. There are a few lenders that can give up to INR 40 lakh. The approval of personal loans is dependent on the income of parents and credit history. On the other hand, there’s not much of a difference between the two in terms of interest rates. For a better summation of the cost, both parents and students are advised to use the EMI calculator. This will make it clear the cost to bear towards either of these loans. Also, factor in the tax benefits of education loans to see whether the overall cost reduces compared to a personal loan
