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Education Loan or Personal Loan - How to Fund your Higher Education?

Published on Oct 9, 2020Updated on May 21, 2024

Education Loan or Personal Loan - How to Fund your Higher Education?

As we have seen from recent trends, students these days are not only smart and talented but also willingly want to push themselves out of their comfort zone when it comes to Higher Education and wish to explore various options. Opting, for instance, for studying at a Foreign Institute is a common practice these days and can easily cost a huge sum. This is especially the case if, along with education fees, we take into account lodging / accommodation costs, day to day expenses, etc. The best way to make this dream come true is by taking a loan. Then the question arises, what sort of loan does one take? The most common question is - Education Loan Vs Personal Loan, which one to go for? Both of them have their own set of advantages and disadvantages. Let’s understand them in detail.

Amount of Loan

  • The Loan amount should be decided based on an analysis of one’s financial condition. A personal loan for higher education might be a good option as it can be used for not only funding one’s education but also one’s other expenses whilst abroad. Also an instant personal loan online is easily available at the click of a button. The personal loan documents also are not too complicated and extremely straightforward, making it a very good choice
  • An Educational Loan can be used only to fund your education and may not cover costs such as accomodation or day to day expenses.
Must Read: 5 Steps to Get a Personal Loan for Online Courses in India


  • Education loans have strict rules for eligibility. Since the student is the primary applicant, eligibility depends on the academic record of the student, as well as the institute and the course opted for. If the student is unable to meet the lender’s criteria on any of the above, he may not be able to get the required funds.
  • On the other hand, since a personal loan can be taken for any purpose, all one needs to be eligible for a personal loan is that the primary applicant must have a credit score of more than 750, and should have a stable source of income. There are some other criteria too including age, minimum monthly income, employment type and so on, but these vary across lenders.  


  • A guarantor or collateral is not always required if a personal loan is applied. However, the primary applicant should be one who has a steady source of income, and will be able to make repayments.
  • If one opts for an education loan, a co-applicant and a third party guarantor will be compulsorily required depending upon the lender one chooses.

Repayment of Loan

  • In a Personal Loan, there is no moratorium period offered to repay the loan. It starts from the very first month
  • However, in an Educational Loan, a period from 6 months to a year after completion of the course is provided after which the EMI’s start. This enables the applicant (in most cases, the student) to find a job before he can start repayment of the loan.

Interest Rates

  • At the time of applying for an instant personal loan online, the one thing that catches our eye is the interest on these personal loans. It ranges anywhere from 11.99% to 36% making it expensive. 
  • An educational loan, on the other hand, offers concessions if the student starts repayment of the loan during the moratorium period itself, making it desirable
Must Read: How to Get a Personal Loan at the Best Interest Rate

Tax Benefits

  • A personal loan doesn’t enjoy any tax benefits in our country
  • However, the interest component on an Educational Loan can be claimed as a deduction, thus lowering our taxes.

From the above discussion, it’s clear that Education Loan Vs Personal Loan is a very important step before deciding what best suits our needs. As mentioned above,  an education loan offers lower interest rates and flexibility on its repayment. The major cons would be the eligibility criteria. Thus, if the course / institution / your academic record does'nt match the requirement of an education loan, then you can go for.a personal loan instead. It is also very easy to apply for a personal loan online, as the personal loan documents as well as the process of application are simple to understand and hassle-free. However, do note that unlike education loans, personal loans may have higher interest rates and have to be repaid immediately every month as per the EMI schedule, and thus can only be availed by a parent / family member of the student. 

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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