Lost Password


Liquidating personal funds or taking an education loan for abroad studies

Securing funding and determining how to pay for your education are important factors to take into account when thinking about studying abroad. Many students might not even consider taking a foreign flight because of their financial situation. The majority of parents believe that self-financing, which involves selling valuable assets or making arrangements with friends and family for money, is a more practical and sustainable option for paying for their child’s education. But not all families can receive this kind of financial aid; in this case, student loans can be helpful.


After completing your studies, you are expected to repay any education loans you have taken out with interest. Students face a challenge in this situation because many of them don’t want to pay back debt after graduation. For this reason, self-funding options are frequently preferred by parents and students to pay for their international education. Any of the following could be the self-funding option:

  • Paying for one’s own studies.
  • Seeking financial assistance from friends and family for your studies.
  • Obtaining a loan from a third party (other than government banks or lenders for education loans).

Note – To know more about collateral security and its different types click here.

Benefits of liquidating personal funds

  • Financial freedom:

Liquidating personal funds provides immediate access to the required amount, eliminating the need for debt. This can be especially appealing for those who prefer to enter their post-graduate life without financial obligations.

  • Avoiding interest charges:

Unlike loans, using personal funds does not incur interest charges. This can save substantial amounts of money over the long term, making it a cost-effective choice.

  • Reduced stress:

Knowing that your education is funded without the burden of a loan can alleviate stress during your academic journey. It allows you to focus on your studies without the constant pressure of repaying a loan.

Limitations of liquidating personal funds

  • Limited resources:

Depending solely on personal funds may limit your budget for other essential expenses, such as accommodation, living expenses, and unforeseen emergencies. This could potentially impact your overall experience and well-being abroad.

  • Lost investment opportunities:

Liquidating investments or savings may mean missing out on potential growth and returns. This opportunity cost could impact your financial future, especially if the funds were originally intended for long-term investment goals.

  • Risk of depleting emergency fund:

Using personal funds may deplete your emergency fund, leaving you vulnerable to unexpected expenses. It’s crucial to strike a balance between funding your education and maintaining a financial safety net.

Student loans for studying abroad

It is evident that you want a high-quality education if you intend to study overseas, but doing so is an expensive endeavour. It’s a risky move to use your parents’ entire life savings to pay for your study abroad, which is why many students are turning to loans for financial support.

You can make sure you have enough cash on hand to cover your living expenses and tuition by applying for a loan. This relieves you of a significant headache so you can focus solely on your studies.

Benefits if taking an education loan

  • Preservation of personal funds:

Opting for an education loan allows you to preserve your personal funds for other important life goals, investments, or emergencies. This can provide a financial safety net beyond your academic pursuits.

  • Structured Repayment Plans:

Education loans typically come with structured repayment plans, offering flexibility based on your financial situation. This can make the repayment process more manageable, especially during the initial stages of your career.

  • Building Credit History:

Successfully repaying an education loan contributes positively to your credit history. A strong credit history can be beneficial when making future financial decisions, such as applying for a mortgage or securing other loans.

Limitations of taking an education loan

  • Accrued interest:

Education loans come with interest, and depending on the terms, this can add a significant amount to the overall repayment. Understanding the interest rates and terms is crucial to evaluating the long-term cost of the loan.

  • Financial obligation:

Taking an education loan means committing to a financial obligation that may last for several years. This can be a source of stress for some individuals, especially if they face challenges in securing stable employment post-graduation.

  • Potential impact on future finances:

Monthly loan repayments may impact your ability to save or invest in the immediate years following graduation. It’s essential to consider the long-term financial implications of loan repayment when planning your post-graduate life.

Choosing between self-funding and opting for an education loan is a critical decision for those planning to pursue higher education abroad. Let’s compare the two options to determine which is the more advantageous choice.

  1. Saving your personal funds – Self-funding involves liquidating various assets like fixed deposits, gold, shares, mutual funds, land, and insurance. On the contrary, opting for an education loan allows you to retain your savings and safeguard collateral by ensuring timely EMI payments.
  1. Financial benefits – Self-funding provides no monetary advantages, whereas opting for an education loan comes with benefits such as lower interest rates, favorable repayment policies, government subsidies, and potential income tax rebates.
  1. Proof of funds – When self-funding, universities often require a solvency letter to confirm admission, demonstrating the student’s payment capability with about one year’s worth of additional funds in their account. Conversely, obtaining an education loan provides a Loan Sanction Letter from the bank, serving as proof of finances.
  1. Arrangement of large funds – Self-funding necessitates years of planning and saving, making it challenging to accumulate a large amount in a short period. Education loans, however, allow for the immediate disbursal of the required funds. If additional funds are needed, students can easily request an extension from the bank, a flexibility not available with self-funding.
  1. Majority of expenses covered – Studying abroad involves various expenses, including tuition fees, food, rent, laptops, insurance, books, airfare, visa fees, and more. An education loan comprehensively covers these major expenses, offering a more feasible solution compared to the complex process of self-funding.

In many cases, students are advised to opt for an education loan due to the added advantages it brings. By choosing this financial route, individuals can focus on their studies without the stress of managing complex financial arrangements. Thus, obtaining an education loan for higher education abroad is often recommended as the more practical and convenient choice.

Share This Post

Like This Post


Related Posts


Editor Picks

Popular Posts