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Student loans vs Self-funding: Which is Better? 

When considering studying abroad, securing funds, and figuring out how to pay for your education is a major consideration. Due to financial constraints, several students may not even consider flying abroad. Most parents consider self-financing as a realistic and more viable alternative for funding their child’s education by liquidating valuable assets or arranging funds through family friends and relatives however, such financial aid is not available to all the families, this is where student loan can help. 

This article will provide you with a brief overview of the student loans and self-funding and then draw a comparison between the two so you can decide for yourself which one is the best option for you. 


When you get an education loan, you are supposed to pay the loan back with interest after the completion of your studies. This is a challenge for students because they will be burdened to pay the debt post studies which many of them don’t want to do. This is why students and parents often prefer to finance the overseas education through self-funding options. The self-funding option could be any of these:

• Financing own studies
• Asking friends and family to provide funds for your studies
• Getting loan from third party (besides government banks or education loan lenders)

Budgeting Your Education while Self-funding

If you are financing your education by yourself then there isn’t much room for incurring extra expenses and savings. Therefore, you must find a way to budget your education and you can do so with the help of these sources.

• Financial Plan- You must plan out your budget and calculate your expenses prior to arriving at your study destination. You must arrange enough finances which enables you to be prepared for any financial difficulties which might arise during the course of your education.
• Scholarships and Grants- Many universities and government of several countries offer national overseas scholarships to international students, getting a scholarship is also a great financial aid.

• Part-time Work-There is part-time work opportunity for international students which will be enough for you to bear some of the major expenses.

Education Loans for Abroad Studies

If you are planning in studying abroad it is obvious that you seek quality education, but it is a costly affair. To use your parents’ entire life savings to fund your overseas education is a rather risky move, therefore, many students are seeking loans for financial assistance. 

Getting a loan will ensure that you have enough money to pay for your tuition and cost of living. This helps reduce one major headache for you so you can concentrate on just your education.

Types of Loans

• Secured loans- These loans are offered based on collateral; it is a great option for those who have an asset to pledge security to the bank. You can avail higher loan amount, lower rate of interest, high chance of approval and many such advantages are available with this loan.

• Unsecured loans- These are the education loan for abroad studies without collateral which means there is no need to pledge security to obtain unsecured loan however there are certain other aspects such as parent’s income, university fee and ranking, etc. which are considered for this loan.

Self-funding or Education Loan: Which is Better?

Now that we have discussed about both the loans and the benefits of each of these loans, let’s draw a comparison to determine which loan in fact is better.

• Saving your Personal Funds
Self-funding entails liquidating all your assets such as fixed deposits, gold, shares, mutual funds, land, insurance, etc. on the other hand by getting an education loan you can retain your savings and can salvage your collateral with timely payment of the EMI.

• Financial Benefits
You cannot avail any monetary advantages if your self-fund your education. But if you get an education loan you get benefits such as lower interest rates, satisfactory repayment policies, government subsidies, income tax rebate etc. 

• Proof of Funds 
When you are self-funding your study, the university needs a solvency letter in order to confirm your admission. Students must demonstrate their payment capability to the university by exhibiting around one year’s worth of additional funds in their account, however when you take out an education loan, your bank will provide a Loan sanction Letter as proof of finances. 

• Arrangement of Large Funds
Self-funding requires years of planning and saving so you cannot get a large amount in a short period of time. When you get a loan, the bank disburses the required loan immediately. So, in case you require more loan you can simply request it from your bank, however, you cannot do this if you are self-funding.

• Majority Expenses Covered
When studying abroad there are many expenses to be covered such as tuition fees, food, rent, laptop, insurance, cost of books, air ticket, visa fees, etc. and all these major expenses are covered in an education loan. However, taking care of all these expenses through self-funding will be very difficult.

In most cases students are advised to take an education loan instead of self-funding because it comes with added advantages when you avail an education loan. So, get an education loan for higher education abroad so you will not have to worry about financing your education.

If you are looking for an education loan for your education abroad then get in touch with ELAN Loans where we will assist you in getting the right loan as per your university and program.


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