Is a Personal Loan a Good Choice for a Student?

A personal loan is an unsecured type of loan which can be utilized for a variety of uses including educational expenses. But, are these loans the best choice for a student, or should they opt for more traditional sources of loans to meet the expenses related with education? In this article we examine whether or not a personal loan is a good choice for a student to fulfill their educational expenditures, and what alternatives they can look into.

When To Choose A Personal Loan

The cost of education is always rising, necessitating students to find ways to fund their studies. Colleges and universities are expensive, and as such, students need to find means to pay for the expenses and acquire a degree and secure good jobs. As this is such a widespread concern, there are numerous ways for students to find the necessary funds, personal loans being one of them.

However, in general, it is advisable that students only opt for a personal loan to meet their educational and related expenses only if they have exhausted all other means. Scholarships, grants, federal student loans, and private student loans are some of the most common sources of education funding which students should explore before looking at personal loans.

This is because each of the traditional options offer a bundle of advantages that personal loans do not.

Scholarships and Grants for instance can be extremely useful, because they meet whole or part of specific educational expenses like tuition (depending upon how much you qualify for), and they do not need to be repaid. However, you may need to fulfill certain requirements in order to be eligible for them.

Also read: Can I Use a Personal Loan to Buy a Car? 

For example, if you qualify for a basketball scholarship, you will have to be in the school’s basketball team, and retain a certain position and performance to continue leveraging the scholarship.

Similarly, federal loans and private loans are granted after you fill out certain application forms and qualify to get them based on the criteria set by the federal government or by the private authority granting them. If you meet these criteria, the loan is granted and usually disbursed directly to your school on your behalf.

If, however, you do not qualify for these, or have exhausted them, and are still left with a chunk of expenses for which you need funding, you can look at personal loans.

Advantages and Disadvantages of Personal Loans

Personal loans for students can be advantageous in some circumstances, and at the same time, are not suitable for bearing all educational expenses in general. As such, being aware of their characteristics and weighing them as pros and cons with particular regards to students only, is critical in making informed decisions. The following are the advantages and disadvantages that these loans have for students.

Pros:

• Disbursed To You: Since the personal loan is disbursed to you, you can choose how to spend it. Depending upon how much the loan amount is, you can choose to use it for tuition expenses, buying books, or paying other fees and charges like dorm fee, food expenses, and more. Other types of loans, such as federal student loans are disbursed straight to the institution, and if anything is left after that, that amount is given to you for use.

This direct transfer gives students more freedom to budget and divide the funds as per their requirements.

– Fast processing: Personal loans are processed fast and transferred for your account, generally inside 2  days, whilst different financing alternatives consist of government and private loans and grants and scholarships takes lots longer to process. As a result, you need to be very careful about applying for this loan in advance so that you can get it on time.

– Apply at any time: There are not any deadlines when it comes to getting a private loan, because of this you could apply even whilst you are searching out alternatives or when you are short on time. However, there are deadlines for applying for scholarships, presents, federal loans, and even personal loans. If you pass over this cut-off date, you must await the following cycle to open to use it.

Cons:

– Higher Interest Rates: When private loans are issued, they frequently include higher rate of interests as compared to different sorts of loans specially designed for educational expenses. For example, government student loans have very low interests compared to private loans.

– Strict repayment phrases: The process of private loan repayment starts straight away, generally within 30 days of issuance, and students want to begin repayment according to this time table.

Also read: When To Consider Getting A Personal Loan As A Student

In addition, those loans are offered for a completely brief time period, this means that higher month-to-month payments.

Conversely, government or non-public student loans are generally issued for longer durations of time (typically around 30 years), because of this that monthly payments are much lesser and available alongside the reimbursement terms. Such loans’ repayment terms start after the education is completed and may regularly repay as soon as a student receives a job.

– Credit Needs: Personal loans are normally issued to individuals with strong credit ratings. Students generally don’t have a good credit history or an awesome credit score, because of this their loans are more likely to be denied. However, for federal loans or private education loans, students ought not to have their credit score-checked, making it less difficult to get a loan.

– No additional benefits: With private loans, there is no room for college students to stop paying if they do not have the budget to repay the mortgage within the stipulated timeframe. But that isn’t always the case with government and personal loans. These provide protections consisting of deferments, forbearance and public service price waivers, amongst others, to the ones in need.

While private loans can be used to finance education, they may be at the bottom of your options due to the many benefits offered by other options. Their high interest rates and accelerated repayment plan may not be ideal for students and just add another burden.