Educational loan for MBA students can be better than a personal loan. Here’s how?

The cost of quality education is very high nowadays. And if you are planning to pursue your studies in a foreign country, the cost increases even further. There are many ways you can fund your education. For example, borrowing from your friends and family, using your savings, or taking a loan from a bank. Many families take loans to fund their children’s higher education. Personal loans and education loans are the most preferred loan options when it comes to funding children’s higher education.

Today, with the help of the following points, we will understand how an educational loan for MBA students can be better than a personal loan.

Loan Amount-

The cost of education has gone up several folds in the last decade. Getting an education from a reputed college is not as affordable anymore, as it used to be. When we talk about personal loans, the loan amount approved by the bank is sometimes not sufficient to pay the entire amount of your college fees. Then students fret about arranging the remaining amount. In the case of education loans, the capped amount is much higher. The entire college fee amount is taken into account and the bank transfers the full amount to the institution. This allows the students to focus on their studies and chase their dreams without any financial worry.

Lower Interest Rates-

While comparing different loan offers, we often select the one that has the lowest interest rates. Interest rates are the defining factor of a good or a bad loan offer.

The interest rate range of personal loans lies somewhere between 10.5 - 25% per annum. Different banks and NBFCs have different rates of interest. However, all these interest rates fall in the bracket of 10.5 – 25%.

On the other hand, educational loans for MBA students have fairly lesser interest rates when compared to the rate of interest on personal loans. The interest rate bracket for education loans is 6-10%.

Loan tenure-

Loan tenure plays an important role in calculating your EMIs. Longer the tenure, lesser the EMI.

Personal loan offers loan tenure of up to 5 years.

Education loan is quite generous and offers loan tenure up to 15 years.

Moratorium Period-

The moratorium period is a time period for which the borrower is exempted from paying the EMIs.

A personal loan doesn’t offer a moratorium period facility and hence, the EMI starts from the very next month of the loan disbursement. This makes it hard for the student to repay the loan amount while still being in college.

However, educational loan for MBA students offers a moratorium period. In the moratorium period, the student can finish his/her studies, get a job, and be financially strong before the EMI starts.

Tax Benefits-

In a personal loan, the interest rates cannot be claimed as deductions and hence there are no tax benefits attached to it.

The interest rates paid for the repayment of education loans can be claimed as deductions at the time of filing the tax and thus, you can lower your tax amount.

Getting higher education is a costly affair in today’s time. But that cannot be the reason to clip the wings of your children’s dream. Having the funding source secured with all the above-mentioned points will help you make a wise choice for your child’s future and make it easier for him/her to repay the loan.