With the cost of education increasing by 10-12% every year, pursuing your academic aspirations can be challenging. This is where education loans help you bridge the gap between you and your academic pursuits. Many students may wonder whether self-funding or a student loan is better. So, here’s what you must know about education loan vs self-financing.
Key highlights:
- Education loan vs Self-Finance
- What is an Education Loan
- What is Self-Financed Education
- Education Loan Advantages
- Quality Education
- Atmanirbhar
- Credit Score
- Don’t Have to Depend on Family Savings
- Self-Finance Challenges
- Breaking Your Savings
- Arranging a Large Sum of Money
- Covering Multiple Expenses
- No Credit History
- No Freedom to Choose Your Dream University
Education loan vs Self-Finance
What is an Education Loan
An education loan is the amount you borrow from a financial institution to finance your academic journey. This amount is later repaid through simple interest (SI)/partial interest (PI) during the moratorium period and later through Equated Monthly Instalments (EMIs)
What is Self-Financed Education
Self-financed education refers to paying for all your educational expenses, such as tuition, accommodation, and travel, using personal or family savings, investments, or other personal financial resources without depending on a lender. Although it does not involve debt, it can take a toll on your savings and affect long-term financial planning.
Education Loan Advantages
Quality Education
One of the education loan benefits is that you can pursue your preferred courses at your chosen university, which otherwise may be out of reach. This will ensure access to quality education without compromising due to financial constraints, allowing you to gain knowledge and develop the skills required to thrive in your career.
Atmanirbhar
By availing an education loan, you will be encouraged to take up the financial responsibility, as you will take care of your own educational expenses and repayments. You can take pride in earning your self-made badge.
Credit Score
Timely repayment of an education loan will establish a good credit history, which can be useful for the future when you will opt for other financial solutions, such as a home loan, car loan, or credit card. Your creditworthiness will unlock multiple benefits when you opt for such products.
Don’t Have to Depend on Family Savings
By opting for an education loan, there will be no need to tap into long-term savings or emergency funds, enabling you to maintain financial security while still pursuing academic aspirations. With student loans, you don’t have to liquidate your assets. This way, family savings can help you during unforeseen circumstances.
Self-Finance Challenges
If you are confused and can’t decide whether self-finance vs education loan is better, here are some disadvantages of self-finance you must know.
Breaking Your Savings
Self-financing usually involves breaking into years of hard-earned savings or emergency funds, which can interfere with long-term financial objectives and lower your family’s financial buffer for unexpected expenses. Parents work patiently and consistently to create a safety net for contingencies. By dipping into your family savings, you take away that cover.
Arranging a Large Sum of Money
Paying for the entire cost of education, particularly overseas, requires a large sum of money. Raising this money in a short time can be challenging and may result in financial stress or compromise on other essential needs. So, if you’re confused between a study abroad loan vs self-finance, please remember that an education loan will help fund your education, irrespective of the cost.
Covering Multiple Expenses
Education isn’t just about tuition fees. Costs such as accommodation, travel, books, and living expenses can add up fast, making it challenging to cover everything from personal funds alone.
No Credit History
Paying from personal savings means you will lose the chance to build a healthy credit score. In contrast, repaying an education loan responsibly can establish a good credit rating, which can be beneficial when you opt for other financial products.
No Freedom to Choose Your Dream University
Budget constraints with self-financing may compel you to opt for a cheaper course or university, instead of your dream university or programme that is more aligned with your career aspirations.
Now that you know the details about education loan vs self-finance, you can make wise decisions. If you are looking for the best education financing partner, at Avanse Financial Services, we offer student loans that cover the holistic cost of education, including tuition fees, travelling expenses, accommodation costs, living expenses, the cost of learning devices and other education-related expenses.
We don’t believe in putting a cap on your academic dreams, so you don’t have to worry about the education loan amount. You can use the EMI education loan calculator to try different permutations and combinations of the student loan amount and the tenure to find the one that suits you the best. If you have any queries about student loans, education loan interest rate, or your academic journey, please connect with us. We will be glad to assist you.
