Should you take an education loan or a Personal loan for low salary to fund higher education
Every year, hundreds of thousands of students in India rely on student loans to cover the costs of attending university, both domestically and overseas. Therefore, many students and their families worry about choosing between a Personal loan for low salary and an education loan to acquire these funds. Your own transparency is the first order of business. You need to have a firm grasp on your end goal, current and future financial standing, strategy, risk tolerance, repayment options, etc.
You’ll be in a better position to evaluate your options and pick the one that works best for you once you’ve calmed your thoughts. The benefits and drawbacks of each choice must be carefully weighed before making a final choice, and this process requires extensive research.
To help you make an informed decision based on your individual requirements and preferences, we’ve outlined below a number of factors to consider when deciding between the two alternatives.
1) The dollar amount at stake varies from one lender to the next and from one borrower to the next’s early salary loan eligibility.
After considering the student’s fees, costs, etc., financial organizations provide financial aid through a loan. A student’s ability to repay a private school loan has a greater impact on the total amount that can be borrowed. This can be supplemented by money other than the standard tuition and fees.
Although the minimum amount varies from bank to bank and institution to institution, it often starts at 50,000 and can go as low as 5,000 for short-term or skill courses. The highest amount can go up to 1.5 crores. As little as Rs.5,000 may be required for shorter-term or skill-based programmes. Personal loan for low salary can involve maximum amounts between 30 and 40 lakhs and minimum amounts between 25,000 and 30,000. Your eligibility for an early salary loan may affect these rates, and they may also vary from bank to bank.
The interest rate is a major determinant in choosing between the two possibilities. However, the exact amount an individual can borrow depends on a number of factors, including the applicant’s credit history and other financials.
Personal loans typically have higher interest rates than college loans. It’s common for student loans to have interest rates between 7 and 24 percent, whereas the rate for an early salary loan is between 10 and 24 percent. Also, in order to encourage more women to continue their studies, a 0.5% discount is offered on student loans to those who identify as female.
There is a 1% interest rate reduction available to students who begin repaying their student loans before the moratorium period begins.
A student’s choice of loan is heavily influenced by the repayment or moratorium period. This implies principal and interest payments will begin as early as next month.
Taking out a loan to pay for school not only relieves financial pressure on the student and their family, but it also teaches the student the value of hard work and the importance of financial discipline.
4) Loan duration/tenure – the length of time for which a loan is approved has a significant impact on the monthly payment. Loan terms for higher education tend to range from 5 to 15 years.
However, shorter-term educational loans, such as those for vocational or technical training, are available. The resulting reduced EMIs are in addition to the lower interest rate. In contrast, it is not easy to receive a Personal loan for low salary for more than 5 years, and if you do, you should expect to pay significant interest and a hefty EMI every month. However, depending on your credit history, income, and the specific terms and features of your personal loan, you may be able to acquire a longer loan term or have your current one extended.
The borrower is eligible for tax breaks under Income tax Section 80E for the first seven years of loan repayment, beginning on the day the repayments begin. The interest portion of EMIs is tax deductible for the student. To that end, it might be subtracted from the taxable income of the student. Personal loans do not qualify for any tax breaks. In comparison to Personal loan for low salary, this fact significantly increases the value of education loans.
Education loans typically necessitate a co-applicant, such as a parent or a spouse, to act as a guarantor or collateral. Short-term loans for skills or training only require a co-borrower (a parent or legal guardian) and don’t necessitate a guarantor or collateral. If the total cost of your school loan is more than Rs.4 lakhs, a guarantor may be necessary, and if it’s more than Rs.7.5 lakhs, you may need to put up additional collateral. A personal loan, on the other hand, is based solely on the borrower’s income and doesn’t require a guarantor or collateral security.
To be eligible for an early salary loan, an applicant must meet certain criteria, the specifics of which vary from lender to lender.
The education loan is preferable to a personal loan for education because of the lower interest rate, longer loan term option, and, most importantly, the moratorium period. If you need money for school but don’t have a co-signer, guarantor, or collateral, then you should look into getting a personal loan instead. For example, let’s say someone earns a respectable $2,000 per month but has no collateral, co-borrower, or guarantor and needs $5,000 for a foreign training or education programme. Given the absence of other options, a personal loan would have to be used.
To conclude
There is no single optimal strategy for borrowers seeking educational financing. Your early salary loan eligibility, preferences, financial payback condition, EMI amount, proposed tenure, etc., are vital factors that will determine the decision. It’s true that school loans have better terms and lower interest rates than other types of loans, but not everyone is approved for them. This is why many borrowers rely on personal loans. If you believe you qualify for any of these options, it is in your best interest to shop around for the best loan and lender to meet your needs before committing to a loan.
