Education Loan vs Personal Loan

When it comes to funding higher education, students often face a crucial decision—should they opt for an education loan or a personal loan? While both can help cover tuition and other expenses, they differ in terms of interest rates, repayment flexibility, and tax benefits. 

In this blog, we’ll break down the key differences to help you make an informed choice!

Here is a quick summary: 

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Key Differences Between Education Loan and Personal Loan

Let’s see what are Education Loans and What are Personal Loans: 

• Education Loans: Specifically designed for academic expenses, with lower interest rates (starting from 4%), repayment breaks (moratorium period), and tax benefits under Section 80E. Requires proof of admission and is tailored for long-term repayment (5–15 years).
• Personal Loans: Flexible in usage, faster to process, but with higher interest rates (13%–32%) and immediate repayment requirements. No collateral or admission proof needed but comes with shorter repayment terms (1–7 years).

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Main Differences Between Loan Types

Education Loan and Personal Loans are basically meant for different usage and are tailored accordingly. Lets see the major factors that set these loans apart: 

Key Takeaway: Choose an education loan for long-term affordability and tax savings. Opt for a personal loan if you need quick, flexible funding for smaller amounts.

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Flexible Criteria for Co- Applicant Eligibility. Check Propelld Education Loans. 

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Education Loan Benefits

Education loans offer financial perks that make them a better choice than personal loans. These include lower interest rates, tax deductions, flexible repayment terms, and even consideration of academic achievements. Together, these features help reduce financial stress during your studies and aid in planning for the future.

Interest Rates and Tax Deductions

Education loans typically come with lower interest rates compared to personal loans. Plus, they offer tax benefits under Section 80E of the Income Tax Act. This allows you to claim unlimited deductions on the interest paid for up to eight years. For instance, if you’re paying ₹4,000 in interest each month as part of your EMI, you could deduct ₹48,000 annually from your taxable income.

Flexible Repayment Options

Education loans are designed with students in mind, offering repayment plans that adapt to their financial situations:

• Moratorium period where full EMI payments are deferred until after graduation.
• Option to pay only the interest while still studying.
• Extended repayment terms ranging from 5 to 15 years, reducing monthly payments.
• Adjustments based on income levels after graduation, making repayments manageable.

Academic Merit

Unlike personal loans, education loans often take academic achievements and potential into account. Factors like your grades, the quality of your course, the reputation of your institution, and your future career prospects can play a role in securing a loan. This approach is especially helpful for students who may not yet have a strong credit history.

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Approval Based on Student Potential. Easy Education Loans from Propelld. Do Check your Eligibility. 

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Personal Loan Benefits

While education loans are designed specifically for academic purposes, personal loans provide the flexibility to address a variety of financial needs. Knowing these benefits can help you decide if a personal loan is the right choice for your education-related expenses.

No Usage Restrictions

Personal loans give you the freedom to use the funds however you need. Whether it's unexpected study costs, additional certifications, or purchasing equipment, the choice is yours. They can also help with supplemental courses or materials. Just be sure to check with your lender to confirm their specific guidelines.

Fast Approval and Disbursement

Personal loans are known for their quick and simple application process. With minimal paperwork required, many lenders offer same-day decisions and fast fund transfers. This makes personal loans a great option if you need money quickly for time-sensitive expenses.

No Collateral Needed

Most personal loans are unsecured, meaning you don’t have to pledge any assets as collateral. This is especially helpful for students or families who may not have significant assets to offer. However, keep in mind that unsecured loans often come with higher interest rates, so it’s important to weigh the convenience against the potential cost.

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

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How to Choose Your Loan Type- Education Loan or Personal Loan? 

When deciding on a loan, take into account your education costs, future earning potential, and possible tax savings.

Education Expenses

Start by calculating your total education-related costs, including both direct and indirect expenses. Here's a breakdown to guide you:

offer more flexibility but often come with higher interest rates.

Once you've estimated your costs, think about your future income potential.

Career and Income Outlook

Consider how your future earnings will align with loan repayment. Education loans typically have lower interest rates and repayment plans tailored to entry-level salaries. Evaluate factors like your expected salary, job market growth in your field, and how soon you’ll start earning after graduation.

Tax Benefits

Tax savings can also play a big role in your decision. Interest paid on education loans qualifies for deductions under Section 80E for up to eight years, potentially reducing your overall costs. Personal loans, on the other hand, don’t offer specific tax benefits for education-related expenses. These deductions can make education loans a more cost-effective option in the long run, especially when paired with their lower interest rates.

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Fast-Tracked Education Loans with Propelld – Funding your Future in Just 7 Days!

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Making Your Choice- Education Loan vs Personal Loan

When deciding between these loans, think about how their features match your financial situation and goals.

When to Opt for an Education Loan? 

Education loans are a better fit if you:

• Need a large amount for higher education (₹7.5 lakh or more)
• Want to take advantage of tax deductions under Section 80E
• Prefer a repayment break (moratorium period) while studying
• Can accommodate a slightly slower approval process

When to Opt for a Personal Loan?

Personal loans are more suitable when you:

• Need quick access to funds for various expenses
• Require a smaller amount (under ₹25 lakh)
• Don’t have collateral to offer
• Want faster approval and disbursement

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Propelld Education Loans

Propelld brings additional benefits to education loans, making them more accessible and convenient:

• No collateral required
• Quick digital approval process, faster than traditional banks
• Flexible repayment options, including moratorium periods
• Merit-based approvals
• Minimal documentation needed
• Option to include relatives as co-applicants for support

With education costs on the rise, choosing the right loan is essential. Propelld’s student-focused solutions provide the financial flexibility and support you need to manage these expenses effectively.

Worried about securing an education loan without collateral? Discover how you can fund your studies stress-free with this expert guide on hassle-free, no-security loans!

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FAQS About Education Loan vs Personal Loan

What are the main differences between an education loan and a personal loan?

An education loan is specifically for academic expenses, has lower interest rates, a moratorium period, and tax benefits under Section 80E. A personal loan has higher interest rates, no tax benefits, and requires immediate repayment.

Can I use a personal loan to finance my higher education?

Yes, but personal loans have higher interest rates and shorter repayment periods than education loans.

What expenses are covered under an education loan?

Tuition fees, accommodation, exam and library fees, books, equipment, and travel expenses for studying abroad.

Are there tax benefits associated with education loans?

Yes, under Section 80E, the interest paid on education loans is tax-deductible for up to 8 years.

Do education loans require collateral?

Loans up to ₹7.5 lakh are usually unsecured. Higher amounts may require collateral like property or fixed deposits.

When does the repayment of an education loan begin?

Repayment starts after course completion, usually with a moratorium of 6 months to 1 year.

Can I prepay my education loan? Are there any penalties?

Most lenders allow prepayment, but terms and penalties vary. Check with your lender.

How do I choose between an education loan and a personal loan for funding my studies?

Choose an education loan for lower interest rates, tax benefits, and a moratorium. Opt for a personal loan only if you need quick funds without restrictions.

Are there any specific eligibility criteria for obtaining an education loan?

You must have admission to a recognized institution, good academic records, a co-applicant with a stable income, and collateral for high loan amounts.

What documents are required to apply for an education loan?

Admission letter, fee structure, academic records, identity and address proof, co-applicant’s income proof, and collateral documents if applicable.