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Higher education has become a necessity in today's competitive environment. And the cost of quality education is increasing every year gradually. Many of us don't plan for such high college fees, and some of us cannot anticipate it. So, to pursue higher education, we need external funds, which can be funded by a loan from a financial institution. Now, the question arises of which loan we should go for, either a personal or education loan. Education loan is not so popular, whereas personal is known by most of the population. An education loan is best suited to meet the expenses of higher education as it is designed to meet the requirements of educational expenses. 1. Interest rates Education loan comes with lower interest rates. Generally, education loans have comparatively lower interest rates than personal loans. The interest on an education loan ranges from 6.85 - 11% annually, depending on various factors like the course you are applying for, college, etc. The interest rates on personal loans range from 10 - 17% annually. Please note that the range mentioned may change, subject to the change in interest rates. 2. Tax benefit When you pay the interest on an education loan, you can claim the deduction for the amount you are paying as interest and get the tax benefit under Sec 80 E of the Indian Income Tax Act. There is no upper limit for claiming the deduction. You can claim as high as you are paying. And you can claim it for a maximum of 8 years. There is no tax benefit on personal loan interest paid to the lender. 3. Loan amount You take an educational loan for as low as Rs 50,000 and as high as Rs 1.5 Crores, depending on the vendor. But the personal loan amount ranges from Rs 50,000 to Rs 50 Lac. However personal loan amount will wholly depend on the borrower's credit score. 4. Moratorium period This is the period when the borrower is temporarily exempted from paying the installments. The aim is to give students sufficient time to complete the course and find a job. This period is extended from 6 -12 months after completing the degree. The interest is charged on the loan amount as simple interest. In a personal loan, no moratorium period is applied (under normal circumstances). Conclusion Education loans have multiple benefits like a moratorium period, lower interest rates, etc., which personal loan does not possess. Considering an education loan over a personal loan could be the right choice FAQs Can I use personal loan for education? Yes, individuals can use a personal loan to finance their education expenses. The loan amount and the repayment tenure depends on your credit profile and your loan provider. What is the difference between an education loan and a personal loan?An education loan is a loan to finance your higher education while a personal loan is a loan used for servicing personal needs like buying a car, a world tour, covering your personal expenses and much more. A personal loan can be used for paying for education expenses but an education loan cannot be used for your personal expenses like marriage, a house or other miscellaneous expenses. An education loan can be taken only by a student and has benefits like a longer repayment tenure, competitive interest rates, a grace period and tax benefits. Should you take a personal loan for your higher education? It is not a wise choice to take a personal loan for higher education because a personal loan's ticket size is not big enough to cover all your education expenses. Personal loans have a repayment cycle that begins immediately unlike education loans where students can get a moratorium period while studying. Benefits like a longer repayment tenure, competitive interest rates, a grace period, and tax benefits make education loan feasible and an attractive option in the long run.

There are collateral vs. non-collateral education loans in India. If you have decided to take a loan to fund your child’s further studies securing one is important to advance your child's future. As you do your research and try to figure out which loan is better for your child, it is important for you to keep several parameters related to collateral in mind https://www.youtube.com/shorts/Icp7ASAGrjw What is a collateral education loan? Collateral is typically property that you give to the lending bank as security against the loan you are taking. The larger the education loan, the greater has to be the value of the collateral. This works as a reassurance to the bank in case the borrower is unable to repay the loan. What is a non-collateral education loan? When the lender issues an education loan without any security, it is known as a non-collateral loan. In this kind of loan, the bank considers the student’s academic track record and the financial track record of the co-borrowers. Now a lot of parents debate over which of these is a better loan format. The fact is both types of loans serve a purpose. Apply for Education Loans As a co-borrower, you will need to analyze the features of both loan types and choose the one that works better for your situation. ParticularsCollateralNon-CollateralCost of loan7-9% per annum11-14% per annumHow much loan can you getUp to 90% of collateral value, can even go up to Rs. 1.5 crUsually limited toRs.50 lakhsTenure of RepaymentUp to 15 yearsLimited to 10 yearsRepayment periodUsually after 1 year, of course, completion/start of the jobAfter 6 months of job completion, immaterial whether the student has got a jobFlexibilityThe interim grace period before the loan is to be repaid can be extended on request if the student is unable to find employmentThe interim grace period before the loan is to be repaid can be extended on request if the student is unable to find employmentDocumentationExtensive paperwork, with a confirmation of admission to the institute of your choiceMinimal paperwork and admission confirmation requiredProcessing feesA percentage of the loan amountA percentage of the loan amount, but these can be negotiatedProcessing timeAnywhere from 30 to 45 days depending on the documents submitted. The due diligence done to verify the ownership of the collateral is quite stringent10-15 days if all your documents are in order: admission confirmation, the credit history of co-borrowers, credit scores, etcWhat can be offered as collateralProperty with no liabilities, fixed deposits, stocks, bonds, etc- Both collateral v/s non-collateral loans have much to offer the customer. While on paper, a collateral loan definitely makes a lot of financial sense, everyone may not be able to manage the collateral of large properties or other instruments that the bank may require as security. So it helps to review all the options in the market and pick the one that works best for your specific situation. Whether you opt for one or the other, there are a few thumb rules you absolutely must keep in mind when applying for an education loan.  If you have plans to take an education loan to fund your child’s higher studies, start saving from the early years. Borrowing money should be your backup for the shortfall in your funds. Do not make overseas education plans with the money you can borrow. Financial conditions can change at any point in time, and having your own funds will give you the confidence you need to guide your child to the career option of their own choice. Once you have taken an education loan, your priority should be to save money and pay back the amount as soon the possible. Interest rates and rising inflation rates make the amount of your loan repayment variable, and it is easy to get stuck in the debt trap if you do not have a clear repayment strategy. Help your child enter the adult world with as little debt as possible and encourage good financial discipline from the early days. This will stand him/her in good stead in adult years. Last but not least, once you have identified the loan that works for you, do due diligence, read the small print, ask questions, and then go ahead and take it. Let this loan be just the stepping stone to a great life that is planned for your child as he/she steps into a whole new world of global studies and learning.  Do not let a lack of funds hold your child back. With a little planning and discipline, you will find several tips to plan your finances well and secure a future for your child’s higher education. FAQs What is the main difference between collateral and non-collateral education loans? The primary difference is that collateral education loans require an asset as security, while non-collateral loans don't require any asset. Collateral loans may offer lower interest rates, while non-collateral loans are unsecured. What assets can be used as collateral for education loans? Common assets used as collateral include property, investments, or even a vehicle. The exact types of assets accepted can vary between lenders. Do non-collateral education loans have higher interest rates? Non-collateral education loans often come with higher interest rates because they carry more risk for the lender, as there's no collateral to secure the loan. Are there any advantages to taking a collateral education loan? Yes, collateral education loans typically offer lower interest rates, higher loan amounts, and may be easier to qualify for, especially if you have valuable assets to pledge. Can I switch from a non-collateral to a collateral education loan later on? It may be possible to refinance or convert your non-collateral education loan into a collateral loan if you have assets to pledge, but the terms and feasibility will depend on your lender's policies.

If your child is planning to pursue higher studies in any professional sphere, you will have to be financially ready to shell out anywhere from Rs. 4 - 5 lakhs to Rs. 70 - 80 lakhs, depending on the course, institution, and country of study.  You also need to keep in mind that the banks will discuss the loan amount only after your child’s admission has been confirmed by the institute. Hence it becomes important to have rough estimates to work with, to do your homework well in advance, and to understand what your loan eligibility is. Apply for Education Loans List of questions you should ask before taking an education loan 1. Understand your costs Compare the various institutes and their fees, hostel fees, and additional charges, if any. Step One is having a thorough grasp of the total expenses that you are likely to incur across the entire duration of the course. If you are looking at international universities, remember to add travel costs as well. So get that number, and allow for a 5% - 10% buffer for any unexpected expenses. Compare the costs of the few institutes that your child is considering. This will help you arrive at the right estimate while working out your expenses. https://www.youtube.com/shorts/woiuX0oE1YU 2. Check with the bank on what components of the total expenses the loan will cover Different banks have different parameters. Some loans will cover only tuition fees, others cover tuition and hostel fees. Some may even include your travel costs. Make sure you are well aware of what is being covered when discussing the loan amount. https://www.youtube.com/shorts/p2Bj4VgVHgQ 3. Find out what percentage of the total cost will be given as a loan That means the loan will not fund your full expenses. Usually, a bank will fund 80% of the tuition fees / total expenses. You will have to fund the other 20% as a down payment. https://www.youtube.com/shorts/4lVk1mKqwaI 4. Check which courses and institutions are eligible for education loans This is an important consideration, as if your institute is not on the list, getting an education loan will be a challenge. https://www.youtube.com/shorts/TJ4qgFj46Uw 5. Check if your bank needs collateral Most nationalized banks in India and large private banks will require collateral that is 3-4 times in value of the loan you plan to take. Check what your bank is expecting. Additional read: Does education loan impact student loan interest rates? 6. Will the loan require a guarantor? This is a common practice, especially for overseas education loans. It is the bank’s way of assuring the loan is paid back. https://www.youtube.com/shorts/mW0VH10uH9I 7. Find out the loan repayment policy Education loans typically start repayment only after the course ends and the candidate starts work. Banks usually provide a grace of 6 months to one year post the course completion or till the time the candidate gets a job. Do note that this time period cannot be indefinitely extended even if the student is unable to find employment. https://www.youtube.com/watch?v=9EAyvncisU4 8. What is the loan tenure? The smaller the loan amount, the shorter the tenure.  This tenure will change subject to the changing interest rate of the loan, so you must track the rates on a regular basis. https://www.youtube.com/watch?v=fufyFB9aMQI 9. Is there a processing fee? This fee is usually a percentage of the loan amount. Check on this and see if you can get a waiver. If your loan amount is large, your processing fee will be large too, and you will have to arrange for this along with the down payment that you will have to make towards your part of the loan. Additional read: What are blue-chip stocks 10. How much of this education loan can I self-fund? If you start investing and planning well in advance, you can actually partially fund the cost of education. This is important as no loan is free money, you have to pay it back, and interest rates keep going up year after year. Check out the College Cost Calculator to see how much you need to spend and how you can save for the future cost of your child’s education.  With some smart planning and investment, you can actually reduce the education loan burden on your family. To know how you can do this, check out our link on savings and investments here. While you ask these questions before you take the education loan, you must also check out if your child is eligible for scholarships. Applying for these well in time and winning the scholarship will mean you will have to borrow that much less. After all, every rupee saved is a rupee earned. FAQs What should I consider before taking an education loan? Before taking an education loan, understand the total course expenses, what components the loan will cover, and how much of the total cost the loan will fund. What does an education loan typically cover? Education loans may cover tuition fees, hostel fees, and sometimes travel costs. The coverage varies between different banks and loan providers. How much of the total cost will an education loan cover? Most banks fund around 80% of the tuition fees or total expenses, requiring you to contribute the remaining 20% as a down payment. Are all courses and institutions eligible for education loans? Not all courses and institutions may be eligible for education loans. Ensure your chosen course and institute are on the list of eligible options. Does an education loan require collateral? Many banks in India and large private banks may require collateral, typically valued at 3-4 times the loan amount. Check your bank's requirements.

Financial planning is extremely important so that you have great fortunes in the latter half of your life. If an individual plans his or her finances well enough, then a good corpus can be generated out of it. However, some financial mistakes can make financial planning harder. These mistakes may not be intentional but can be harmful! 5 financial mistakes to avoid at all costs 1. Spending unnecessarily  Most people do not plan their budgets well. It is a thumb rule that everyone should do their monthly budget planning as soon as they get their monthly income. You can keep aside money for necessities like school fees, ration, electricity bills, rent, and so on.   Apart from these things, there are certain miscellaneous costs that are also extremely important. You should keep a tentative amount for that as well. Make sure that you do not spend unnecessarily. If you do go overboard, try to cut off funds in different domains of requirement. Mistakes to avoid while investing in the US Market Read More 2. Paying off debt through savings  This is considered to be one of the biggest blunders committed in the finance domain. People get a mortgage of 15%, and the return of the savings plan is just 7%. So, people think that it is a good plan to pay off all the debts from the interest that is recovered through savings. You should never be doing that because if an individual takes money from their savings account, then they will tend to lose the interest that is earned by compounding. Furthermore, they will also incur a penalty for taking out money from a retirement fund or fixed deposit. 3. Ignoring the credit score  Ignoring the credit score is the next big mistake that people tend to commit. If you maintain a good credit score, it can help you save a lot of money on interest rates. Furthermore, maintaining a good credit score makes it easier to get a loan, and can fetch better rates of interest when you are buying a personal asset or getting a personal loan.   Inculcate a habit of checking your credit score every six months so that you can have a stable and progressive portfolio. Make changes according to the credit scores that are being offered. Common Investing Mistakes to Avoid Read More 4. Not saving for child education  With the growing rate of education inflation, if you miss out on saving and investing properly for your child’s education, then it might prove to be a heavy burden for you later. Hence, you should make sure that you are setting aside a certain amount every month that is invested in your child’s higher education. Moreover, the pandemic has also led to an increase in tuition fees of colleges in India and abroad.   If you start investing early enough, you will be able to generate a good corpus for your child’s higher education which will ensure no financial burden on him or her. 5. No savings plan for retirement  Retirement is a phase of a person’s life where he or she lives on what has been earned and invested until now. Hence, it is a crucial thing to plan and save wisely for retirement. It is best to start saving as early as possible. If you are still young and earn less income, then start small but be consistent and disciplined. Start a SIP for Rs. 100 or a PPF account. The earlier you start, the bigger the amount that you will be able to generate.   Furthermore, 15% to 20% of your annual income should go to retirement. This will make sure that you have a good future once you retire and you do not have to work anymore.  These are some financial mistakes to avoid if you want to secure a fine future for your family!   FAQs Why is financial planning important for parents? Financial planning ensures a secure future, especially in the latter years of life, and helps create a substantial corpus. What is the biggest blunder when paying off debts using savings? The mistake is using savings with lower returns to pay off high-interest debts, leading to loss of interest and possible penalties. Why should you pay attention to your credit score? A good credit score saves money on interest rates, facilitates loans, and offers better interest rates for personal assets and loans. Why is it crucial to saving for your child's education? Rising education costs can create a significant financial burden. Saving for higher education ensures a stable financial future for your child. What's the importance of a retirement savings plan? Planning and saving for retirement are essential to ensure financial security during retirement. Starting early and being consistent in savings is vital for a comfortable future.

Post-pandemic online master’s degrees have become extremely popular. If you have applied for an online degree and are finding it hard to pay the fees, then here are some merits and demerits of opting for a personal loan for an online master’s degree!  From top universities like Harvard University, Oxford University, the University of Edinburgh, and Johns Hopkins University to online platforms like Coursera and SkillShare made accessibility to quality education easier and a great way to upskill. While some are free, there are some that charge a heavy fee. Depending upon the course, the average cost of an online master’s degree can go up to $29,000 (Rs. 23-24 lakhs).   This can be tough to finance independently as most banks do not offer education loans are not offered for online degrees. Some banks like Axis Bank do offer education loans for an online master’s degree. But space is still limited. Maximum banks and financial institutions only sanction education loans that require students to study on campus, and online degrees are not covered by them. Thus, if you are short on expenses, then you can opt for a personal loan for your online master's degree.   What are the merits of opting for a personal loan for online master’s degrees?  1. Zero Collateral   Personal loans are called unsecured loans and they do not require collateral from the borrower to sanction their claims. It is easier to get a personal loan as banks do not need you to give land, shares, or other bonds as collateral to claim. The approval largely depends on your credit scores, income history, and general eligibility or worthiness in terms of repayment. If the bank feels that you are not capable of repaying the loan, they are likely to reject the application.   2. Easy Sanctions  Personal loans verify the candidate’s worthiness, credit history, and financial stability. If you can provide an assurance to the bank that you are able and willing to repay then the banks are likely to sanction your loan faster. In terms of personal loans without collateral, your relationship with the bank, income stability, and financial background comes in handy for easy sanctions.   3. Easy Disbursals  Some banks disburse funds within seconds! Once your loan is approved and accepted, the banks can wire the money to your account immediately. Most personal loans and their lenders pride themselves on immediate and easy disbursements so that the borrower can finance their immediate needs faster. It may not be the case for all types of loans as each has its own processing period.   What are the demerits of opting for a personal loan for online master’s degrees?  4. High-Interest Rates  Interest rates vary from bank to bank and to lender. Personal loans are by nature unsecured which means the chances of getting a high interest rate may be higher. Beware of the interest rates, try to consult multiple banks before starting the application process. Having a good relationship with a bank and a financial history can help you.  5. Stress of Repayment   The stress of repayment is associated with every loan and is not exclusive to personal loans. Most borrowers struggle with repayment and may find it overwhelming at times. Having a stable income or savings can help you with the process of repayment. The cumulative interest rates and rising prices can make the job tougher but not impossible.  6. Eligibility Rigidity  Since most personal loans are unsecured, they focus largely on your credit score and financial history to sanction it. This can be a merit and demerit because a low credit score could jeopardize your application approval and make it tougher for you to gain the amount you want. Applicants are scrutinized more closely and any flaw could delay the process.    These are some merits and demerits of opting for a personal loan for an online master’s degree! An informed and well-rounded decision can help you pick the right path and help you secure a brighter future. FAQs Can you take an education loan for online degrees? Axis Bank offers education loans for online courses and executive courses that further your career. However, most banks do not offer education loans for online programs. Is it wise to take a personal loan for higher education? If you have the capacity to repay your loan on time then you can consider but it's wise to opt for an education loan for education purposes because it is made for meeting your education requirements. Should you opt for a personal loan in lieu of an education loan? No, education loans and personal loans are not the same. They can not be interchanged. Personal loans have a shorter repayment tenure, higher interests, and no moratorium period, and the loan amount offered may not be efficient enough to cover all your education expenses.

Are you planning to co-signee on your child's education loan? Then here are some questions cosigners should ask before taking an education loan! Education loans are important and useful. Especially when the inability to meet the demand for a higher fee structure is quite common. In India, the RBI has reported a spurt in the demand for big-ticket education loans. The role of a cosigner at such times is very important as they automatically become equally liable for the loan repayment as the borrower if things do not go as planned. Generally, organizations do not sanction an education loan without a creditworthy cosigner. He/ she can be a family friend, relative, spouse, guardian or parent, etc. and his/ her responsibility is immense. Thus, it is important to know about the different questions cosigners should ask before taking an education loan. 7 questions cosigners should ask before taking an education loan 1. Why does the loan applicant need a cosigner? Generally, young adults who apply for education loans have just started and have no earnings. Other times, they might have bad credit reports because of missed or late payments. Lenders need assurance from a reputed cosigner before sanctioning an education loan to such people.  One of the questions cosigners should ask before taking an education loan is about the credit history of the borrower. In case his/ her credit report is good but/ he is being asked for a cosigner just because of underage then it is okay to sign alongside. But, a bad credit history should make the cosigner beware of the pitfalls of cosigning. This also helps the cosigners find out whether the loan applicant is trustworthy, as well as, responsible by nature.  2. What is the loan amount? The co-signer must be fully aware of the total amount of the education loan. The co-signer, in no doubt, is signing alongside the borrower in good faith. However, down the line, should anything untoward happen, the co-signer may have to be responsible for the loan repayment. 3. What are the terms of the loan? One of the relevant questions cosigners should ask before taking an education loan is about the terms of the loan. It includes payment term length, repayment options, when is the loan repayment going to start and what happens if the repayment premium is not on time. The standard education loan is for ten years with a fixed monthly premium. The cosigner must remember that the loan terms, extended repayment options, and interest rates are different for private and federal students. Cosigners must ask questions as if they are borrowing money for themselves because only then they can know about the exact loan terms. Additional read: What is the cost of school education in India? 4. Will the loan applicant be able to meet the terms of loan repayment? The cosigner should be fully aware of the loan applicant’s financial position and the loan amount. He/ she should ask him/herself whether the borrower has the necessary assets or financial means to fulfill the loan terms. The cosigner should also know whether the loan applicant has any other loan in his/her name and whether he/she can continue to make payments for all of them.  5. In case of default, will the cosigner be able to pay the loan amount? According to statistics, at least 38% of cosigners are called upon to pay up the loan amount because the loan applicant is unable to do so. The co-signer must be prepared for any eventuality and ask him/herself whether he/she is ready to do so under unforeseen conditions. 6. What are the risks involved for the co-signer? The cosigner should know about all the risks involved if he/she signs the education loan. If the borrower is late then the credit score of the cosigner also drops alongside him/her. If the cosigner wants to get a loan or a mortgage then the cosigned loan will have an impact on his/her credit history. 7. Is there an option where the cosigner can be released from the responsibility? Sometimes, lenders offer release terms to the borrower under specific terms. The co-signer must be fully aware of them to minimize the risk factors involved in signing the education loan. FAQs What are the risks involved for the co-signer? The cosigner should know about all the risks involved if he/she signs the education loan. If the borrower is late then the credit score of the cosigner also drops alongside him/her. If the cosigner wants to get a loan or a mortgage then the cosigned loan will have an impact on his/her credit history. Why does the loan applicant need a cosigner? A cosigner offers a guarantee to the lender that the loan will be repaid. The presence of a cosigner/co-applicant helps your application especially as a student going for an education loan because they In case of default, will the cosigner be able to pay the loan amount? According to statistics, at least 38% of cosigners are called upon to pay up the loan amount because the loan applicant is unable to do so. The co-signer must be prepared for any eventuality and ask him/herself whether he/she is ready to do so under unforeseen conditions. Conclusion There are numerous questions cosigners should ask before taking an education loan because they will also have a responsibility towards fulfilling the conditions of the loan in case of any default. There is an inherent risk involved in being a co-signer. Hence, it is doubly important for him/her to ask the relevant questions. Undertaking a serious discussion with all the involved stakeholders will help to clear all the doubts and understand whether it is feasible to sign as a cosigner or not. 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