Personal and Education Loans for Indian Students Abroad

Personal and Education Loan
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Pursuing higher education abroad is a dream for many Indian students. However, the cost of education in countries like the USA, UK, Canada, and Australia is very high. To finance their education, students often consider taking loans. Education loans are usually disbursed to the university directly and students cannot get it in personal account. However, personal loan for education is disbursed to a personal bank account, which one can use at their convenience. 

But is it possible to secure both personal and education loans together? The answer is yes but with certain terms and conditions. Let’s understand the conditions where you can get both loans together.

What is an Education Loan?

Education loan is a type of loan availed by students to fund their education in India or abroad. This loan is designed to cover the costs associated with higher education like tuition fees, accommodation expenses, travel costs, and sometimes even living expenses. Check some of the key features of education loans below:

  • Education loans often come with lower interest rates compared to personal loans.
  • Many education loans offer a moratorium period. The purpose of the grace period of student loans is to provide them enough time to get financially sound.
  • Under Section 80E of the Income Tax Act in India, borrowers can claim tax deductions on the interest paid on education loans.

Also Read: Want a quick loan for education? Check out all the information on Bajaj Finserv Personal Loan for Higher Education

What is Personal Loan?

Personal loans, on the other hand, are unsecured loans that can be used for any purpose like covering the gap between the education loan amount and the total expenses or managing other personal expenditures. The borrower can use it for any purpose and the bank or lender usually transfers the amount of the loan to the personal savings account of the borrower. You can also take a personal loan for debt consolidation. Check the major features below:

  • Personal loans usually come with higher interest rates compared to secured loans like education loans.
  • Since personal loans are unsecured, they do not require any collateral and this is one of the major reasons for high interest rates on personal loans.
  • The amount received from a personal loan can be used for any purpose, giving the borrower flexibility.

Is it possible to get a Personal Loan and an Education Loan Together?

When you apply for a loan, the bank verifies a lot of information like your monthly family income, documents, collaterals etc. One of the most important factors that the banks consider is checking the credit report and CIBIL score of the borrower. If the score is good and income is sufficient, you can get a personal loan if you have an existing education loan or vice versa. The loan may get rejected if you have a bad credit score, or days past due in CIBIL. Check some important factors responsible for the approval of a loan:

ParametersConditions for Loan Approval 
Credit ScoreMust be Good (Above 750)
Loan AmountOne of the loans may get rejected if the amount of the other availed loan is very high
Debt to Income RatioDTI shall be around 20-30%
Source of IncomeAn established source of income must exist
Repayment BehaviourThe payment of existing loans shall be regular in the books

Also Read: HDFC Bank is one of the most preferred choices for personal loans. Check out all the information on HDFC Bank Personal Loan for Education

Factors Responsible for Loan Approval

For any type of loan, there are certain factors which are necessary for loan approval. Goof credit history, reliable source of income, collateral etc are required for approval of a loan. Each loan type has its own set of eligibility criteria. For education loans, eligibility often depends on the academic credentials and the course being pursued. Personal loans, however, depend more on the borrower’s credit score and repayment capacity. Check more details below:

  • Maintaining a good credit score is one of the most important aspects as it impacts the approval of both loans.
  • Students with a low credit score might face difficulties in securing a personal loan.
  • Education loans usually cover up to 80-90% of the total expenses. Personal loans can be used to bridge the remaining gap, but it’s essential to ensure that the total borrowing does not become unmanageable.
  • Crafting a well-thought-out repayment plan is very important. Education loans offer a moratorium period, but personal loans usually do not. 
  • It’s important to have a clear strategy for repaying the personal loan, which may require starting repayment during the study period.
  • For education loans above INR 7.5 lakh, banks might require collateral or a co-applicant, as per the RBI guidelines on education loans.
  • Personal loans do not usually require collateral but having a co-applicant with a strong credit profile can improve approval chances.

Securing both personal and education loans together is possible for Indian students aiming to study abroad. However, the chances of approval depend on credit score, monthly income, debt-to-income ratio etc. Check some common FAQs below:


What are the primary differences between personal and education loans?

Education loans are designed specifically to cover educational expenses such as tuition fees, accommodation, and travel costs. They usually come with lower interest rates compared to personal loans and are disbursed directly to the university. On the other hand, personal loans can be used for any purpose and are transferred to the borrower’s personal bank account.

Can I apply for both a personal loan and an education loan together?

Yes, it is possible to apply for both a personal loan and an education loan at the same time. However, the approval of these loans depends on several critical factors. A good credit score, generally above 750, is essential for approval. Banks also consider the debt-to-income ratio, which should ideally be around 20-30%, and require a stable source of income.

What factors are important for the approval of personal and education loans?

Several factors are important for the approval of both personal and education loans. A good credit history, stable source of income, less than 30% DTI etc are necessary for loan approval. The total loan amount should be manageable and not excessively high.

Are there any tax benefits associated with education loans?

Yes, there are tax benefits associated with education loans under Section 80E of the Income Tax Act in India. Borrowers can claim tax deductions on the interest paid on education loans for up to 8 years.

Why the interest rate is higher for personal loans as compared to education loans?

The interest rate on an education loan is lower than a personal loan because education loans are mostly approved based on collateral whereas personal loans are unsecured loans.

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About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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