College is a great time to move outside one’s comfort zone and connect with new people. But, it can be expensive. Even with government funding and a scholarship program, most students still struggle to pay for the high costs of getting a degree. This is where personal loans might come in handy.
What Is a Student Personal Loan?
A student personal loan is a type of funding that can be used to pay for college-related expenses like tuition fees, books, rent, living expenses, and transportation. It can be paid back in monthly installments, usually within two to five years. However, these numbers may vary depending on the lender.
Where Can I Apply for One?
Student personal loans can be obtained from different financial institutions. The application process will be slightly different from lender to lender. That’s why it’s important to choose one that will best suit your repayment capacity. Here are some places that offer personal loans:
Banks
Most banks require applicants to have good credit standing, which can be an issue for students who are still building up their scores. But, the good thing about personal bank loans is they usually come with benefits like lower interest rates.
Credit Unions
Similar to banks, credit unions also require having a good credit history. But, the good thing about them is that they have fewer fees and favorable rates. However, you must apply for membership to qualify for their personal student loan program.
Online Lenders
If you need fast cash, borrowing from online lenders might suit you best. They have a quicker turnaround time compared to banks and credit unions. If you get approved, the money will be credited straight to your bank account.
What Requirements Will I Need?
Applying for a student personal loan can be challenging, one reason being the amount of paperwork that needs to be done. But, with proper planning and preparation, you can increase your chances of getting approved for one. Here are the criteria that you must meet:
A Good Credit Standing
Ideally, students must have good credit standing. The lender will check if you have any history of late payments and bankruptcy. If you do not have an outstanding credit score, you can opt to get a cosigner.
The cosigner will share the responsibility of paying for the loan in case you are unable to do so. This person is not limited to parents. They can also be your friends, spouse, etc., as long as they have good credit scores.
A Stable Source of Income
Students need to show that they have the means to meet monthly payments. They may be required to show proof of income, like a bank statement. The annual salary requirement may differ depending on your chosen financial institution.
Proof of Enrollment
Student applicants must be able to prove that they are enrolled in a program, with at least a half-time course load (equivalent to 6-8 credit hours). Their school must also be recognized by their lender of choice.
What Are the Different Types of Personal Loans?
When taking out a loan, it’s important to consider different factors such as repayment terms and interest rates. Here are the most common personal student loans you can explore:
Unsecured Loans
This type of financing option can be paid back in monthly installments. It doesn’t require collateral when applying for the loan. The borrowing amount can range from $1,000-$50,000, sometimes even $100,000, for people with outstanding credit scores.
Secured Loans
Similar to unsecured loans, repayment is also made on a monthly basis. However, collateral, like a car, is required when applying for one.
Co-signed Loans
This type of funding is recommended for students who are self-employed, have little to no credit history, or do not meet the minimum salary requirement. Having a cosigner can increase your chances of getting approved. You can also gain access to better rates.
Key Takeaway
Taking out a personal student loan entails a lot of financial responsibility. Before applying for one, be sure to exhaust other types of funding options first, such as scholarships and grants. If you need help with the application process, don’t hesitate to consult a professional. Doing this will help you secure a loan that will get you through college.
