Engineering Education Loan vs. Personal Loan: Which is Better?
Introduction
When it comes to financing an engineering degree, students and parents often consider two main options: an engineering education loan or a personal loan. While both can provide the necessary funds, they differ significantly in terms of interest rates, eligibility, and repayment terms.
Interest Rates and Terms
An engineering education loan usually comes with a lower interest rate compared to a personal loan. This is because education loans are designed specifically for students and often include benefits like government subsidies, moratorium periods, and tax benefits under Section 80E of the Income Tax Act.
Purpose and Loan Coverage
Education loans are purpose-specific—they cover tuition fees, hostel charges, lab fees, books, and other academic expenses. Personal loans, however, are multipurpose and don’t always provide enough funds to cover the complete cost of education. Moreover, education loans can go up to ₹50 lakh or more for reputed institutes or foreign education.
Eligibility and Documentation
To get an engineering education loan, students must have secured admission to a recognized engineering college. A co-applicant and academic records are usually required. In contrast, personal loans depend solely on the borrower’s credit history and income level, making them harder for students to access without a working co-borrower.
Repayment and Moratorium Period
One of the biggest advantages of an engineering education loan is the moratorium period, during which no EMI is required. This period includes the course duration and 6–12 months after completion. Personal loans, on the other hand, require immediate repayment and don’t offer such flexibility.
Conclusion
For students pursuing a degree in engineering, an engineering education loan is generally the better choice over a personal loan. With lower interest rates, targeted coverage, and repayment flexibility, education loans are specifically designed to support students on their academic journey.