For many students dreaming of studying in a global university, arranging finances is one of the first major hurdles. An education loan for abroad studies is a popular option, but some students and their families also consider taking a personal loan instead.

Both loans provide funds to cover expenses, but they differ significantly in terms of eligibility, interest rates, repayment terms, and tax benefits. Choosing the right loan is crucial to ensuring a stress-free financial experience during your overseas education.

In this article, we'll compare education loans and personal loans so you can make an informed decision.

1. Purpose of the Loan

The primary difference lies in the purpose:

  • Education Loan: Specifically designed for students pursuing higher education. Covers tuition, living expenses, books, travel, insurance, and other related costs in top study destinations.

  • Personal Loan: Can be used for any purpose, including education, weddings, vacations, or emergencies. There's no restriction on usage.

While personal loans offer flexibility, an education loan is more suitable and structured for academic purposes.

2. Loan Amount and Coverage

Education Loan:

  • Higher loan limits based on course and university (up to ₹50 lakh or more for reputed global programs).

  • Covers full cost of study abroad including tuition, accommodation, insurance, visa fees, and travel.

Personal Loan:

  • Typically capped at ₹10–25 lakh, depending on borrower profile.

  • Does not offer targeted benefits like fee coverage or moratorium periods.

  • May not fully cover costs of an international education.

Verdict: For a complete funding solution, education loans are better suited.

3. Interest Rates

Education Loan:

  • Interest rates are generally lower (around 8–12%) for premier institutions.

  • Subsidies may be available under government schemes.

  • Women applicants often enjoy concessional rates.

Personal Loan:

  • Higher interest rates, often ranging between 12–20%, depending on credit score and lender.

  • No subsidy benefits.

Clearly, an education loan for abroad studies offers more affordable borrowing.

4. Repayment Flexibility

Education Loan:

  • Comes with a moratorium period (course duration + 6–12 months after completion).

  • EMIs start after the moratorium period.

  • Early repayment allowed without penalties in many cases.

Personal Loan:

  • Repayment starts immediately.

  • No moratorium, which adds financial pressure during your studies.

For students with no income during their overseas education, education loans provide essential flexibility.

5. Tax Benefits

Education Loan:

  • Eligible for tax deduction under Section 80E of the Income Tax Act on interest paid.

  • No upper limit on the deduction amount.

Personal Loan:

  • No tax benefits unless used for specific purposes like home renovation or business expansion.

  • Using a personal loan for education does not qualify for tax deductions.

This makes an education loan more tax-efficient for funding international education.

6. Collateral Requirements

Education Loan:

  • Loans up to ₹7.5 lakh typically require no collateral.

  • Higher amounts may require property, fixed deposits, or third-party guarantees.

  • Unsecured education loans are available for top-ranked universities.

Personal Loan:

  • Unsecured, no collateral required.

  • Approval depends heavily on credit score and income of the applicant or co-applicant.

7. Documentation and Processing

Education Loan:

  • Requires offer letter from university.

  • Academic records and admission proof required.

  • Co-applicant details, collateral documents (if applicable), and cost breakdown needed.

Personal Loan:

  • Minimal documentation—mainly KYC, income proof, and credit history.

  • Faster processing.

While personal loans are quicker to process, the long-term benefits of an education loan outweigh this minor advantage.

8. Managing Currency Transfers

Both loan types require efficient fund transfer for tuition and living expenses abroad. Using trusted platforms ensures competitive exchange rates and minimal transfer fees—reducing your financial burden during study abroad.

9. Combining Loans with Scholarships

Winning study abroad scholarships can reduce your overall borrowing requirement. Whether you choose an education loan or personal loan, mention scholarship awards to lower your loan amount and interest burden.

Conclusion

When comparing an education loan for abroad studies to a personal loan, education loans emerge as the clear winner:

✅ Lower interest rates

✅ Tax benefits under Section 80E

✅ Moratorium period offers repayment flexibility

✅ Larger loan amounts to cover full study abroad expenses

Personal loans may be suitable only for small funding gaps or in cases where eligibility for an education loan is an issue.

To maximize your financial planning, explore education loan options on MSM Unify. The platform also helps you discover top study destinations, secure study abroad scholarships, and manage efficient fund transfer for your international education needs.

Make the smart choice—opt for an education loan tailored to your academic future.