Study Abroad Education Funding - Personal Loans Vs Education Loans
With the increasing competition, students are exploring their options and are willing to push themselves out of their comfort zones especially when it comes to gaining higher studies abroad. The quality of education plays an important role in one’s life in determining the financial benefits from one’s professional life.
There are number of universities overseas that provide job-oriented diploma and degree courses and equip students with the practical knowledge and tools required to build a stronger tomorrow. However, the quality of education comes at a high cost. In such cases, students take the help of a loan to fulfil their dreams. At this stage, the primary dilemma faced by many of the students is that whether to apply for a personal loan or an education loan. Both have certain pros and cons. Let us understand the term personal loan.
A Personal Loan is a type of unsecured loan that is borrowed to fulfil the personal needs of an individual. Since it is an unsecured loan, applicants are not required to pledge anything against the loan. The financial institutions grant personal loan after considering the factors like applicant’s income, credit and financial history, repayment capability etc. The interest rate on this type of loan is high due to the amount of risk is involved. On personal loans, applicants are not allowed any moratorium or grace period as the repayment of personal loan begins just after the next month of availing the loan.
A personal loan can be of advantage in fulfilling the smaller expenses but when it comes to funding higher studies abroad, education loans is the best way out.
Education loans are offered by various financial institutions to find higher education. These loans are of bifurcated into two different categories and students can apply for any of these as per their requirements. There are certain factors involved in an education loan. They are namely, like interest rates, quantum of finance, moratorium period, processing fee, processing time etc. The total repayment tenure of an education loan for abroad studies can go up to 15 years where students also get the moratorium period.
5 Factors that makes an Education Loan a Great Choice to Fund Higher Education
Here, we have listed down some of the advantages that makes an education loan a smart choice to fund higher studies abroad:
• Income Tax Benefit: One of the major benefits of availing an education loan is that the applicant becomes eligible to get the income tax benefit under Section 80 E of the Income Tax. It is a great way to save the money while securing a better future. The deductions under this section can be claimed for a total of 8 consecutive years including the year in which the loan is taken in or till the interest on the loan is fully repaid, whichever occurs earlier.
• Covers Overall Amount: An education loan covers the overall amount required to complete an education overseas. Apart from the tuition fee, it also covers the cost of accommodation, library fee, cost of books, travel ticket, purchase cost of the laptop, equipments, overseas health insurance etc. These loans cover the overall cost required to support a healthy lifestyle in a foreign country.
• Moratorium Period: In case of education loan, the financial institutions understand that students cannot become financially independent just after completion of their overseas education. So, they offer a job search or grace period of 6 to 12 months that helps students in securing a decent job to repay the education loan.
• Repayment Tenure: In an overseas education loan, the repayment tenure that is granted by the financial institution is up to 15 years. It gives ample time to the students for the repayment of overall education loan amount whereas in a personal loan, an applicant is granted the maximum time span of up to 10 years.
• Interest Subsidy: The State government and Central government offers various subsidy schemes like Padho Pradesh Scheme & Dr. Ambedkar Central Sector Scheme to the aspiring students belonging to the economically backward classes. On meeting the income criteria for these schemes, the simple interest during the moratorium period on an education loan will be waived off. Interest Subsidy benefits is available for selected courses and institutions as prescribed by government under respective scheme.
So, these are some of the factors that make an education loans a better choice over personal loans to fund an international degree. As mentioned earlier, along with other advantages, an education loan offers lower interest rates and flexibility on repayment. The ever-growing competition in an education loan sector has worked in the favor of many aspirants.
Applying for an overseas education loan can be a smart choice. If you still have any more queries, do reach out to us. Our team of loan experts will resolve all your doubts. It is recommended to explore loan options before finalizing one.
Contact us today and we shall be happy to assist you.