Education Loan vs Personal Loan: Key Differences, Top Banks and More

Education Loan vs Personal Loan: Key Differences, Top Banks and More 

Millions of students apply to universities each year. To fund their education, they choose to take out a loan. However, acquiring the loan is not as simple as it looks.

Students should be especially aware of the type of loan they are receiving, its interest rate, repayment deadlines and eligibility. 

This blog talks about the differences between an Education loan vs Personal loan.

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Difference Between Education Loan vs Personal Loan

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Get Education Loan for Any College in India. 100% Fees Financed- Propelld Education Loan

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Benefits of Education loan

Some benefits of an Education loan are: 

• Reduced interest rate: The interest rate on the education loan is relatively low and cheap because of the collateral or third-party guarantee. Additionally, as it is considered 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 classes. Even after the course is finished, students have six to twelve months to find employment before they must begin making payments. A primary 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.

Also Read: Education Loan Eligibility, Interest Rates and How to Apply

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Benefits of Personal Loan

Some benefits of a personal loan for student are: 

Freedom to use money for varied uses

Unlike education loans, which have restrictions on what can be done with the money obtained through them, loans have no such limitations.

Suitable for executive courses that require work experience with education

Suitable for someone who is working while studying.

Also Read: Instant Personal Loans for Students: 5 Best Loans in India

Get upto 100% Education Fees Financed with Propelld. Simplified  Processing  Dedicated Support.

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When Should You Opt for a Personal Loan?

If you are thinking of an education loan vs personal loan, then you can make a decision through this comparison. 

If the borrower needs lesser amounts of money for a shorter time, personal loans are the best option. A personal loan application process is simple, quick, and requires few papers. The primary determinant of loan eligibility is the credit score. A borrower may be pre-qualified for a personal loan based on their credit score.

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When Should You Opt for an Education Loan?

While there are many options available to borrowers, education loans are the clear favourite between education loan vs personal loan when it comes to financing postsecondary education, both domestically and internationally. When consumers need urgent financing for immediate spending, personal loans are a better fit.

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‍Minimal Documentation. Higher Chances of Approval. Easy Online Processes. Check Your Eligibility. 

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Can I Get Education Loan if I Have a Personal Loan?

While thinking about education loan vs personal loan, some personal loan student doubts are if they can take an education loan while they have a personal loan. 

Yes, you can take an education loan even if you already have a personal loan. The approval will depend on factors such as: 

1. Previous loan repayment history
2. CIBIL score
3. Income
4. Debt to Income ratio

Commercial banks and NBFCs might have complicated and twisted criteria to assess your eligibility for an education loan vs Personal loan where eligibility is decided by factors such as credit score. If you are overwhelmed with the eligibility criteria of banks, check out Propelld! 

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Propelld provides education loans catered to students with simplified eligibility criteria and a 100% digital process that is more convenient and straightforward. 

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Why Propelld?

There are several more benefits of getting a Propelld Education loan. They are: 

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Apply for a Propelld loan today!

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FAQ About Education Loan vs Personal Loan

What is the main difference between an education loan vs a personal loan? 

An education loan is specifically for educational purposes, covering tuition, accommodation, and related costs. A personal loan, however, can be used for any expense, including education, without any restrictions.

Which loan has a lower interest rate: an education loan vs personal loan? 

Education loans generally offer lower interest rates (starting around 6.85% to 11%) compared to personal loans, which range from 10% to 24%, depending on the lender and applicant’s credit score.

Can I use a personal loan to cover education expenses? 

Yes, personal loans can be used for education, as they do not have any specific usage restrictions. However, they may not offer benefits like tax deductions.

Do personal loans have a moratorium period like education loans? 

No, personal loans require immediate repayment, typically starting from the following month after disbursement. Education loans, on the other hand, usually offer a moratorium period during the study course, allowing repayment to begin after completion.

‍Is collateral required for both types of loans?

 Education loans may require collateral for amounts above ₹7.5 lakh, while personal loans typically don’t need collateral but are heavily dependent on credit score and income.

Which loan offers tax benefits?

 Education loans offer tax benefits under Section 80E of the Income Tax Act, allowing deductions on the interest paid for up to 8 years. Personal loans do not provide such benefits.

How long is the repayment tenure for education loans compared to personal loans? 

Education loans can have a repayment period of up to 15 years, while personal loans usually need to be repaid within five years.

Which loan is easier to get approved, education loan vs personal loan?

 Personal loans are quicker to process and disburse as they don’t require specific documentation like proof of admission. Education loans, however, may need proof of admission, a co-applicant, and sometimes collateral.

Is there a prepayment penalty on education loans or personal loans? 

Most education loans don’t have a prepayment penalty, while personal loans may charge fees based on the outstanding amount if repaid early.

Can I apply for an education loan for studies abroad? 

Yes, education loans can be used to finance international education, covering tuition, living expenses, and other costs associated with studying abroad.

What happens if I don’t secure a job after completing my course under an education loan? 

In such cases, education loans typically offer flexible repayment options and moratorium extensions. However, if you're unable to repay, it may affect your credit score.

What is the maximum loan amount available for education and personal loans? 

Education loans can go up to ₹20 lakh or more for international studies, while personal loans typically max out at ₹25-40 lakh, depending on the borrower’s eligibility.

Which loan should I opt for if I need to fund both educational and personal expenses? 

A personal loan would be more suitable for covering multiple types of expenses since it doesn’t have usage restrictions, whereas education loans are strictly for education-related costs.

Can education loans cover 100% of the education cost? 

Education loans may not always cover 100% of costs, as banks might apply a margin requirement, especially for overseas education. Personal loans, on the other hand, can offer 100% financing without restrictions.

Which loan is better for short-term expenses related to education? 

Personal loans are a better option for short-term, immediate expenses, given their quicker approval process and flexible usage.

Do education loans offer concessions for specific groups? 

Yes, many banks offer lower interest rates or additional benefits for women, economically weaker sections, or those opting for specific courses.