Can you take a personal loan for higher education for your child?
Exploring the best way to fund your child’s higher education is a crucial step in planning your child’s future education plans.
While getting an education loan is the more popular route in India, many people do not know that you can also get a personal loan for higher education for your child.
Personal loan for higher education for your child
When you think of financing your child’s education, you automatically think of education loans.
Education loans are extremely helpful when it comes to funding your child’s education but there can be some obstacles that may stop you from availing of this option.
Another equally beneficial option is to avail of a personal loan for education.
Personal loans for education are flexible and collateral-free with a high approval rate. Using a personal loan for higher education for your child allows you to cover multiple expenses.
They are flexible and processed immediately so that you have to cover costs like university application fees, accommodation deposits, flight tickets, insurance, and much more.
Popular banks in India like ICICI Bank, Axis Bank, and many more allow parents to take personal loans for higher education purposes.
These loans are collateral-free which means you are not required to pledge your property, FD, or other assets to the bank. Instead, these banks evaluate personal loan applications based on your credit history and annual income.
Every bank has a different criterion for processing personal loans. Since these are unsecured and collateral-free the rejection rate may be higher.
Maintaining a good credit score and having a clean financial record is a must if you want your application to be approved faster.
Benefits of Personal loan for higher education
Personal loans are a quick solution to an immediate cash need. Whether it’s buying a new laptop or covering up part of your child’s higher education.
Let’s look at some of the benefits of personal loans for higher education:
- No collateral: You do not need to attach your property, FD, bond, or other assets for availing of personal loans.
- Easy to get: Banks allow clients to get personal loans online and offline. The accessibility of personal loans in India has grown tremendously.
- Limited documents: Personal loans do not require many documents for processing.
- Flexibility: You can use your personal loan to buy a new laptop for your child or to cover some immediate expenses like a trip.
- Builds credit score: Personal loans can help you build a credit score and help you, in the long run, to take big loans for education or your own house.
- Fast approval: Some banks approve personal loan applications within the day. That’s how fast the approval cycle for personal loans is in India.
Personal loan vs Education loan for higher education
If you are planning your child’s higher education and wondering which is better, then let’s help you compare the two types of loans.
|Education Loan||Personal Loan|
|Interest Rates||Interest rates generally range between 6.85 – 11%||Interest rates generally range between 10 – 17%|
|Tax Benefits||Tax benefits on repayment of education loan is possible under Sec 80 E of the Indian Income Tax Act.||No tax deduction is available for repayment of personal loans.|
|Average Loan Amount||Rs 50,000 and as high as Rs 1.5 Crores||Rs 50,000 to Rs 50 lakhs|
|Moratorium Period||6 -12 months||None|
Based on the above table, an education loan is a clear winner when it comes to financing higher education for your child.
It offers lower interest rates, tax benefits, a greater loan amount, and a moratorium period wherein your child can get a job and start repaying the loan amount with their own income.
However, personal loans can also be a backup plan or an alternative in case you do not have a good education loan.
They can help you cover a number of costs, easy to process, and can help you with immediate cashflow needs.
How to choose the right personal loan for higher education?
Choosing the right personal loan for higher education requires research and extensive comparison. Check the interest rates and repayment plans of different banks before deciding on a personal loan.
Generally, interest rates are higher on personal loans so choose the right personal loan with the lowest interest rate in the market.
You can also connect with an expert to help you choose the right personal loan for your personal needs. They can help you negotiate a better interest rate and help you plan your repayment strategy so that you can save money.
Determine how much money you need to finance your higher education before opting for a personal loan.
You can use the College Cost Calculator to find out the tuition fees and living expenses in your college city and figure out how much more money you need in order to be comfortable.
Try to take only 25% as a loan so that you can create a comfortable loan repayment plan. Try to make sure your income can easily help you pay off the loan without any added financial stress.
You can always opt for a personal loan for higher education for your child if you are in need of funds.
Do your research, determine which is the best option for you and your child, and then finalize a solid education plan to help build a bright future for your child!