Difference Between Personal Loan and Student Loan in UAE

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Higher education is an expensive affair. As a student or as a parent the issue of financing studies confronts you sooner or later. This is precisely why you must be aware of all your borrowing needs and all the options available to cater to those needs. Personal loan and student loans are the most popular options to consider. But how do you decide which one to opt for in the end?  

If you need a loan immediately for paying off tuition fee and dealing with on campus expenses, then personal loan can be a good choice. Student loan on the other hand is a more affordable option but it doesn’t cover extra expenses.  

Both the choices of loans have their own set of advantages and disadvantages. 

To help you make the right choice, we have listed some major differences here to tell you exactly what separates a personal from a student loan. Let us go ahead to see which is a better choice for you.

How a Personal Loan is Different from a Student Loan?

Here are the major differences between a student loan and a personal loan.

  • Usage of Loan Amount

The major difference between a personal loan and a student loan is the kind of expenses they can be used to pay off. Unlike other loans, such as car loan, home loan, education loan, etc., the usage of personal loans is not all tied up with a specific cause. It can be used to pay any kind of expenses, including medical bills, wedding expenses, debt consolidation, even for a student loan or to pay a tuition fee, etc. 

On the other hand, the student loan can only be used for educational purposes, such as paying off the tuition fees for schools or colleges. These loans can also be used to meet a child’s education-related expenses, such as buying a laptop, paying an internet or a phone bill, etc.

  • Interest Rates

The interest rate for personal loans depends on the monthly salary of the applicant. Mostly the interest rate for personal loans is comparatively higher than the student loan interest rate. In the UAE, the interest rate for personal loans in the UAE starts from 3% and can go up to 22%. However, for student loans, the interest rate is around 4%. 

Various factors affect the interest rates for the applicants. They can simply access the student loan and personal loan EMI calculators available online to evaluate the possible interest rates based on different factors, like monthly income, loan amount, etc. 

  • Loan Amount Disbursement

Another major difference between a personal loan and a student loan is the way lenders disburse the loan amount in the applicant’s bank account. 

With a personal loan, it takes one business day for the lender to deposit funds after the loan gets approved. Once done, the loan applicant is free to use this amount for anything they want. 

On the other hand, it first goes to your financial aid office when it comes to disbursing student loan amounts. They then cover all the outstanding education expenses from the amount, and the remaining funds are provided to the students for their out-of-pocket educational expenditures.

  • Monthly EMIs

Due to short repayment terms, the monthly personal loan EMIs are comparatively higher than student loan EMIs.

You can use EMI calculators in the UAE to find out the exact amount. All you have to do is enter your some information like your age, monthly income, the required loan amount, etc.

  • Payment Options

Both personal and student loans are also different when it comes to making payments. The lenders in the UAE expect you to start paying off the personal loan within a few weeks of disbursement. 

Most banks allow students to start paying the education loan after two to three years of disbursement. Various private lenders even allow students to extend or postpone their repayment as per their financial preferences. 

Also Read How can an NRI Apply for a Personal Loan in the UAE?

Student Loan or Personal Loan - Which One to Choose

Now that you know the differences between a student loan and a personal loan, it will be easier for you to make an informed decision. It all depends on your purpose for applying for a loan.

If you need a loan to refinance your student debts or pay your college-related expenses, you can consider applying for a student loan. A wide array of options with lower interest rates on private student loans in the UAE can make them an efficient way to fund educational expenses.

On the other hand, if you want complete control to decide how you want to use your loan credit, applying for a personal loan would be a better choice. With personal loans, you can pay for non-college costs while fulfilling other financial needs.

You must also keep in mind your current financial condition while applying for your preferred loan. 

You can use personal loan EMI calculators available online to find out the amount of instalment you would need to pay in both cases and make a wise choice. 

Read More: Personal Loan in UAE Exchange: Eligibility & Interest Rates


Once you choose your preferred loan option, make sure you shop around, compare different loan offers, and find an affordable loan that caters to all your financial needs. If you need help, you can always get in touch with our support representatives. They will take you through different offers with their benefits and help you find the best fit.

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