7 Proven Facts Self-financing Vs Personal Loan For Education- Which One To Choose?

Introduction to Self-financing Vs Personal Loan


Deciding on how to pay your education expenses can be quite a task since there are various options available in the market. In today’s world, education’s expenses are too costly as compared to the previous time. Hence, to pay the education fees there are some options for parents either to take loans or self-financing.

When self-financing, personal loan for education is an option to be considered these days. It is essential to compare the differences, advantages, and disadvantages to come to a decision. Self-financing might pose specific challenges, but a personal loan for higher education is also a viable option when it comes to fulfilling your financial requirements and education expenses. 

All are familiar with both term self-financing and personal loans. Self-financing means to raise or provide funds for oneself. A personal loan is available for everyone and for any kind of use. No collateral is needed if you want to avail a loan for your personal reasons. The only requirement is to fulfil the eligibility criteria and have all the essential documents required for applying for the loan. Hence, a personal loan is a better option for funding your child’s education expenses. A personal loan for education is better than self-financing for various reasons.

Comparison of Why Personal Loan For Education Is Better Than Self-Financing:


  • Sense of Responsibility:

If you self finance and pay the entire expenses for the education of your child, it does not put any sense of responsibility on the child. However, if you are taking a loan that the students need to repay after completing the education, it makes the child realize the worth of it and take it more seriously. A sense of responsibility is taught. 

  • Funds:
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If you are self-financing, the entire fee has to be paid at the beginning which might be a challenge, but if you take a personal loan for education, you do not have to pay everything at once. You can repay the principal amount post-completion for which you get some time before you start earning as it makes it easier for you to pay the amount. The loan for education will also cover accommodation charges. 

  • Credit Score:

A credit score is exceptionally essential as lenders consider the score of the borrower to ensure the repayment capacity. Taking a personal loan for education will help increase your credit score leading to an increase in creditworthiness. This makes it easier to take a loan in the future too if you avoid any defaults in the repayment. But self-financing, on the other hand, will not benefit the credit score as it does not make a difference since you are paying from your pocket and there is no credit. 

  • Savings:

Self-financing might use up all the savings that you would have kept for investments or emergencies if you pay for the education through that. However, take a personal loan for education. You can finance education with that and keep your savings for medical or other emergencies, and you can use them as investments too. Hence, you can save these amounts for your own use when there is an emergency situation. 

  • Cost Inflation: 

With the continued rapid rise in the educational fee and expenses, it might get challenging to manage the additional amount and pay the increased fee on your own. A personal loan for education can be taken for a considerable amount making it easier to pay increased expenses.

Self-financing Vs Personal Loan which one is better
Self-financing Vs Personal Loan which one is better?
  • Liquid Funds:
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In the case of self-financing, to show proof of funds, you need to keep liquid funds that are challenging to maintain. But for a personal loan for education, your profile, collateral or personal loan documents are enough to avail a loan. There is no challenge of keeping any liquid funds which otherwise would be added pressure on you. 

  • Tax Benefits:

There are no tax benefits when self-financing your education, but you will, however, get tax benefits based on Section 80E of the Income Tax Act if you take a personal loan for education. This means that self-financing is not a very viable option as compared to taking an education loan to fulfil your education expenses.

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Therefore, it is essential to measure the pros and cons of both personal loans and self-financing. But based on the several points mentioned above, the conclusion is that taking a personal loan for education is the best solution for you. It may solve many issues, it is more natural and beneficial to finance your education. It can also help cover all the other expenses along with education which is daunting in case of self-financing.

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