What are the Pros and Cons of Availing Personal Loan to Pursue Higher Education?
Read this post to know the advantages and disadvantages of a personal loan to pursue higher education
If you look at the bank descriptions of personal loans, you would notice that they have mentioned “pursuing higher education” as a valid reason to avail this loan. But have you ever wondered why banks would suggest a personal loan for pursuing higher education to their customers even though education loans, which cater to the same needs, are also easily available?
Turns out, they do offer a few benefits which we are going to list now. But before you go running to the bank to apply for a personal loan, read the cons too!
Pros of Personal Loans for Pursuing Higher Education
#1 Easy Application Formalities
Personal Loans usually do not require verification or an extensive amount of paperwork for application/approval. This means that there is one less thing to worry about when pursuing higher education.
#2 You Get Access to the Funds Directly
When you are approved for a personal loan, the bank disburses the loan into your account. This means that you get access to the funds directly. In contrast, the funds from education loan are directly disbursed to the university, bookseller, etc. which brings us to the next point.
#3 Use the Loan Amount as Per Your Needs
There are no restrictions on which expenses you use your personal loan to cover. It makes senses since you have the money in your account. You can use the funds to pay for expenses other than just tuition fees, exam fees, paying for study material/laptop and so on. With a personal loan you can also cover your living expenses, food, etc.
Cons of Personal Loans for Pursuing Higher Education
Despite the benefits of personal loans for higher education, many people go for education loans. Do you want to know why? It is because of these disadvantages:
#1 High-interest Rate
The interest rate offered with personal loan is usually higher as compared to an education loan. In fact, many financial experts claim that personal loans are some of most expensive loans to get because of high-interest rate.
#2 No Repayment Holiday
Most banks offer repayment holiday aka moratorium on education loans which may be 6 months after course completion/landing a job. This gives you a chance to complete your higher education without worrying about loan repayment and find a job to start repaying the loan. However, with a personal loan, the repayment period starts from the next month after loan disbursal.
#3 Smaller Loan Amount
The maximum loan amount offered by banks for personal loans is relatively lower than that for education loans. Most banks may offer personal loans up to Rs. 5 lakh to their customers, offering higher loan amount to fewer customers. However, some may offer up to Rs. 15 lakh for education loans to study in India and Rs. 20 lakh for education loans to study abroad.
A Final Word
Now you know that in some cases, a personal loan may be suitable for the purpose of funding your higher education while an education may be better in other cases. It all depends on your personal needs and circumstances.
If you want to know more about education loans offered by major banks in India, please check out our education loans section. We have also shared tips on how to select an education loan, documents required for application in addition to other details.