How to Finance Your Education: Personal loan or Education Loan?
Every year, thousands of students from all over the world leave their native places to pursue their ambitions of studying abroad. They travel in quest of greater prospects and exposure to the careers they wish to pursue. However, some students frequently struggle to fund their higher education in a foreign university. Most of them try to save a significant amount of money from their personal savings. Some may even consider borrowing a large sum from their family and friends. So, how do you pay for your further education? In such cases, taking out a bank loan is the only simple way to finance your education but before taking any loan, you should know what is CIBIL score.
A loan will pay all of your educational expenses, allowing you to concentrate completely on accomplishing your goals. However, a student has two options here-education loan and a personal loan. Deciding between the two is a difficult decision that requires a great deal of attention, patience, and consideration. Irrespective of the choice you make, you should know how to increase CIBIL score if your CIBIL score is low.
Personal vs. Educational Loan
Let’s briefly talk about the features of a Personal loan in comparison to an education loan:
- A personal loan can be used for a variety of things. It can be used to pay for education, tuition, and housing, among other things.
- A personal loan, unlike any other loan, is not secured by any collateral which isn’t the case with an education loan because there you need to provide the assurance that you have got into an university. It is an unsecured loan, the borrower does not need to put up any collateral such as gold or property to obtain it, and the lender cannot auction anything you possess in the event of a default.
- Personal loans, on the other hand, have higher interest rates than home or car loans as the lender has associated higher risk with a personal loan for education purposes. If your CIBIL score is above 700, you can get a personal loan at a reasonable interest rate but if it is low then you should learn the tips on how to increase CIBIL score.
- When you apply for a personal loan, the process is pretty simple because you only need to give a few documents, and once verified, the amount will be disbursed into your bank account. During the application process, every financial institution will check your CIBIL score so it is important to know what is CIBIL score.
Let’s understand the features of Education loan with respect to personal loan:
- The cost of education is rising these days, and not everyone receives a grant to help with college expenses. In such circumstances, borrowing money to pay for education appears to be the best option. An education loan is a loan that students apply for to help them finish their higher education.
- Almost all banks provide education loans to students who want to fund their higher education. Even during the application process for an education loan, some banks take into account the CIBIL score of an individual hence it is necessary to know what is CIBIL score. Usually, the education loan amount money is disbursed at your school/college’s financial aid office.
Pros and cons of taking Education and Personal loan for Education Purposes
Benefits of Personal loan
- You can utilize the funds from a personal loan to cover other expenses. This means that personal loans are not restricted in any way. It can be used to pay for house improvements, vacation expenses, and medical bills.
- To apply for a personal loan, you do not need to provide proof of your education, and thus just a little documentation is required, making the entire procedure much easier. However, banks will take into consideration your CIBIL score hence, if it is low, take steps how to increase CIBIL score.
Benefits of Education Loans
- When compared to a personal loan, an education loan has a lower interest rate. However, one may get a reasonable interest rate if their CIBIL score is higher and if it is not, then one needs to take adequate steps and learn how to increase CIBIL score. If you qualify for a government-subsidized loan, your interest rates will be considerably lower.
- Education loans typically have a lengthier repayment period. You must pay around 6 to 12 months after completing your school. As a result, your monthly EMIs are minimal, and you may easily handle other expenses.
Cons of Personal Loans
As stated before, an education loan comes with a lower interest rate than a personal loan. You will have to pay reduced interest rates if you qualify for a government-subsidized loan and have a higher CIBIL score, you can further get the interest rate down. Therefore, it makes sense to learn how to increase CIBIL score. Education loans often have a lengthier payback period of up to 20 years and must be paid back within 6 to 12 months of completing your study. This reduces your monthly EMIs and allows you to better manage other expenses.
Cons of Education Loan
The loan proceeds are transferred straight into your school/college’s financial assistance office and cannot be used to cover other expenses. It may be tough to repay the loan if you are unable to find work after completing your degree or if your income level does not match the proper ratio with the monthly instalment. All of this can damage your credit history and no amount of tips on how to increase CIBIL score might work in your favour and the worry of not being able to control your costs will keep you up at night. As a result, before applying for an education loan, you should be aware of and thoroughly assess your existing status.
Now that you have all of the necessary information for both loans, you can properly assess them and make your selection. A personal loan, on the other hand, can be a suitable option if you need to cover expenses other than education. However, if you want more repayment flexibility and a lower interest rate, an education loan is the best option and it is important to know what is CIBIL score.
