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Should you take ICICI personal loan or education loan to fund higher education

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Should you take ICICI personal loan or education loan to fund higher education

In India, lakhs of students take up loans every year to fund their higher education in India as well as abroad. So, deciding on whether to opt for an Icici personal loan or education loan to procure these funds is a major concern for many students and families. The first step should be clarity on your part. You should be clear about your aim, financial condition (present as well as of future), planning, the risk factor involved, repayment etc. 

Once you are clear-minded, analyzing and choosing the best option for yourself will become easier. This decision is largely based on the various pros and cons of both the options and a detailed study on them is a must.

To give you a clear idea about both these options and to help you finalize your choice on the basis of your needs and preferences, here are the various factors which affect this very important decision.

1) Amount involved- The loan amount differs across different lenders and varying Icici personal loan eligibility of different borrowers. Banks and lending institutions like Icici personal loan grant loans after evaluating the fees, expenses etc., of the student. Whereas in the case of a personal loan for education, the amount is more dependent on the individual’s capacity to repay. This amount can include extra funds apart from the obvious ones covered for education. 

The minimum amount of education loan starts from Rs.50,000 usually, but in case of short term or skill courses it can be even as low as Rs.5000, and maximum going up to Rs.1.5 crores, although these vary in the banks and institutions. In the case of short term or skill courses, it can be as low as Rs.5000. The maximum amount for Icici personal loan is Rs.30-40 lakhs and minimum around Rs.25000. These also may vary in different banks and institutions and also as per how you qualify for Icici personal loan eligibility.

2) Interest rate- This factor is the one that helps a lot to differentiate between these two options. But this, too, highly varies not only amongst lenders but across each applicant’s Icici personal loan eligibility.

The interest rates for education loans are definitely lower than a personal loan. The interest rate for education loans usually ranges between 7-24%, and Icici personal loan interest Rate ranges roughly between 10.99% -24%. Also, a concession of about 0.5% is available for girls in case of education loans, with a motive to make female students pursue higher education.

If the student starts repaying the education loan before the moratorium period initiates, then

he/she gets a concession of 1% in the rate of interest.

3) Repayment/moratorium period- This is a major factor that affects a student’s decision

regarding the choice of loan, which means repayment of principal plus interest starts next month itself. 

Education loan prevents the student and family from getting burdened immediately and also

inculcates a sense of responsibility in the child to perform decently and be financially disciplined.

4) Loan period/Tenure- The period for which a loan is granted affects the instalment amount to a

great extent. In the case of education loans, a loan can be granted for a period of 5 to 15 years.

However, in the case of education, loans for some short term or skill/training courses can be availed

for lesser tenure like 1 year. This, along with a lower interest rate, leads to lower EMIs. But in the case of a personal loan, it is very difficult to get an Icici personal loan approval exceeding 5 years, and the interest rates are also high, resulting in higher EMIs. But you may get a higher tenure or extend existing tenure as per your Icici personal loan eligibility and set of terms and product features of the lender.

5) Tax exemptions available- Education loan offers tax benefits under section 80E from the day

he/she starts repaying till the next successive 7 years. The interest paid by the student in EMIs is tax-deductible. So it will be deducted from the student’s taxable income. No tax benefits are offered for personal loans. This makes education loans even more beneficial as compared to Icici personal loan.

6) Guarantor/ Collateral- Education loans usually require co-applicants like parents or spouses. In the case of short term skill or training loans, only the co-borrower in the form of parent or guardian is required, and no guarantor and collateral are needed. In general cases, a third-party guarantor may be required when the education loan amount exceeds Rs.4 lakhs, and additional collateral can be required when the amount exceeds 7.5 lakhs. However, a personal loan needs neither a guarantor nor collateral security as it’s an unsecured loan because it is granted on the basis of a person’s income.

The person has to be a salaried, self-employed professional or business person along with other

requirements varying lender to lender and upon qualifying for Icici personal loan eligibility when applying with ICICI Bank.

The education loan should be preferred over a personal loan for education due to lower

interest rates, longer tenure availability and most importantly, moratorium period. A personal

loan should only be taken if there is an absence of co-borrower, guarantor and collateral because, in this case, an education loan won’t be granted. Like in case, a person has a decent income of about Rs.20000 per month but no guarantor, collateral or co-borrower and wants a loan for skill development or training course of maybe Rs.50000. Here a personal loan can be availed as no option of education loan is available.

Summing it up

Overall summing it up, there is no right or wrong answer in a borrower’s quest to get funds to pursue higher education. The answer depends on your loan eligibility, preference, financial repayment condition, EMI amount, tenure offered, etc. There is no doubt education loan has higher features and lower interest rate, but not everyone gets them sanctioned. That’s why personal loan often comes to the rescue of many applicants. And if you think you can avail any of these, then it’s best to compare the loan features and then opt for the right loan and suitable lender to finalize the deal and avail the funds for education.

Read More: Loan Against Property or a Gold Loan: Which is a Better Option for You

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