In recent years there has been a tremendous rise in the cost of education. On the same hand higher education, higher studies from foreign universities are on great trend. Affording this is not an easy task for a middle-class family, and hence they opt for loans to fund higher studies. Education loans are the conventional source to fund higher education, but in recent years personal loans are also being used to fund higher education. This creates confusion among most of the people who are looking to fund their education. Education Loan or Personal Loan?? Which one to take? And what is the difference between them?

Mentioned below are the key differences between a Personal loan & Education loan.

              Personal Loan Vs Education Loan 

Interest Rate:

Personal Loan- The interest rate of personal loan is always high, and it ranges from 10% to 22% per annum.

Education Loan- The interest rate of education loan is lower than a personal loan, and it ranges from 10.35% to 13 % per annum.


Personal Loan- Can be used for any purpose such as funding education, to pay tuition fee, to fund your accommodation and to bear your daily expenses as well when you are studying and not earning.

Education Loan- Can only be used to fund your higher education.

Tax Benefits:

Personal Loan There are no tax benefits associated with personal loans, but when you use this for education, home renovation tax benefits can be availed by submitting the proof regarding the uses.

Education Loan- Tax benefits can be claimed & availed on the interest paid towards your education loan.

Tenure period:

Personal Loan – The tenure period of a personal loan is low and it ranges from a minimum of one year to a maximum of five years.

Education Loan – The tenure period for an education loan ranges from eight to ten years. This makes the repayment of the loan easier and the EMI also reduces.

Moratorium period:

Personal Loan- Repayment towards the personal loan starts from the next month itself.  This means you need to pay the EMI from the next month itself, from when your loan gets disbursed.

Education Loan- Here you get enough time to repay the loan, the repayment starts after 6 to 12 months from when your studies get over. This means the repayment starts when you complete your studies and when your job starts.


Personal Loan- Talking about the disbursement, the personal loan is disbursed in the personal bank account of the borrower which he/she provides at the time of applying for the loan.

Education Loan- When you take an education loan, the loan amount is directly disbursed in the account of the educational institution where you are studying. 


Personal Loan- One can apply for a personal loan any bank, NBFC or DSA. The market of personal loan is getting wider, so as a borrower you have to be more careful and always look for better options regarding interest rate, charges and the most important it should suit your requirements.

Education Loan- You can apply for an education loan from any government or public sector bank. NBFCs offering education loans can also be considered and applied with.

Loan Amount:

Personal loan- The loan amount for which you will be approved through a personal loan totally depends on your eligibility. The maximum loan amount can go up to ₹50,00,000.

Education Loan- With an education loan one can get approved for a maximum of 1 crore to 1.5 crore loan amount when studies in a foreign university.

Personal Loan Pros over Education Loan

  • No restrictions on the use: One can use a personal loan for any purpose, from paying the tuition fee to bear your daily expenses personal loan funds can be used for all.
  • Easy to apply: Applying for a personal loan you don’t need any verification regarding your education, institution. One can also apply for a personal loan online, this is much simpler with minimal documentation.
  • Disbursal time: Personal loan is disbursed very quickly whereas education loan needs time to be approved & disbursed.

Personal Loan: Cons over Education Loan

  • High interest: The interest rate for a personal loan is usually higher as compared to that of an education loan.
  • Immediate repayments: Repayment for personal loans starts within one month from when your loan is disbursed, so you don’t get time to earn or save some money. Whereas when you opt for an education loan repayment starts 6 months or 1 year after completion of your studies. Hence you get enough time to repay the loan.