6 Reasons why study loans are better than personal loans

Are you thinking of taking up higher studies to improve your job prospects?

If yes, then you need to work hard to score well in competitive exams and gather money to pay the cost of your education. A loan will help you solve the second aspect of this problem—gathering money. To solve that problem, you have 2 types of loans to choose from: either study loans or personal loans. Even though personal loans will give you funds instantly, they are not the right type of loan to rely on in the long run. Education loans, as they are also called, give you benefits that far outweigh the same from personal loans. In a moment, you will learn 6 reasons why they are better than personal loans.

1. Lower interest rate

Students get a better deal when they take education loans: the interest rate of education loans are generally lower than that of personal loans. This is more beneficial for you if you intend to take an overseas study loan. A low interest rate means that you pay less as interest on your loan in the long run.

2. Higher principal amount

Students get more funding when they take education loans instead of personal loans. A lender decides the principal amount of a personal loan solely on the basis of the borrower’s credit score. Whereas, education loans are given based on many factors like student’s academic record, their choice of university and course, and their co-borrower credit score.

As a result of the dependency of education loans on multiple factors, students have a better chance to stand strong on those factors and improve their odds of getting more money than if they decide to take personal loans.

3. Lesser processing charges

Lenders know that most students who take education loans do not have a stable source of income so they levy lesser processing charges on education loans than they do on personal loans. As a result, the total amount a student borrows as an education loan is far lesser than a personal loan provided the principal amount is the same in both cases.

4. Optimum moratorium period

Students who take education loans get a grace period after they complete their degree; they are supposed to use this period to find a job or start a business venture. It is also called as moratorium period. Students who take personal loans do not get a moratorium period.

Note that the best education loan in India will give you a moratorium period that extends from 6 months to 1 year from the time you complete your degree.

5. Tax benefits

To incentivise students to pursue higher studies, the Indian government offers students’ tax rebates on their income equal to the interest they pay on their education loans every year. Students who take personal loans do not get such tax benefits while repaying those loans.

6. Longer repayment tenure

Students who take education loans get up to 15 years to completely pay off their loans. In other words, the loan repayment tenure is 15 years. Students who take personal loans to cover the cost of their higher education get only 5 years to repay it. Evidently, taking a student loan is better than taking a personal loan.

Now you know why taking study loans is smarter than taking personal loans. We wish that your study plans proceed as you hope. Have a nice day!