How to Use Personal Loans to Pay for College

If you are a college student or a parent of one, you probably know how much college education costs nowadays. According to the data from the College Board in its Trends in College Pricing Report, the average tuition for public college for the school year 2017-2018 is approximately $9,970.

Three decades ago, that was just $3,190. But apart from the tuition fees, there are still other costs to consider such as dorm or apartment, books, computer, food, transportation and other personal expenses.

Despite the rising college costs, students are still able to sustain themselves and eventually earn a diploma through a myriad of ways. First, your parents may have had the foresight to save for your higher education several years back. Most people save through the 529 plan or a separate savings account dedicated for education purposes.

How to Finance Higher Education

But if you have zero to little educational funding, there are still several options you can take to get yourself through college. Here’s a quick rundown of the potential ways to financially support your college education.

1. Apply for grants and scholarships

Perhaps the first places to look for education financing are the grants and scholarships offered by the college itself, the state and private sectors. Grants and scholarships are determined and awarded based on different merits, such as financial needs, income, and grades. Also, note that students who are financing their education through grants and scholarships are typically required to maintain higher grades or GPAs.

2. Federal Student Loans

Yes, you can ask the government to fund your higher education through federal student loans. These loans are either subsidized or unsubsidized. Subsidized student loans don’t require you to repay the loan and interest while you’re still in school, in essence, because the government subsidizes them. On the other hand, the interests on unsubsidized student loans are shouldered by the student. Federal student loans offer the lowest interest rate, ranging from 5.05% for undergraduate students, and 6.6% for graduate students.

3. Private Student Loans

Unlike federal student loans which are granted by the government, private student loans are provided by private and corporate sectors, such as banks and credit unions. You need to go through and pass the bank’s credit check process to avail private student loans. Also, these loans have higher interest rates than federal student loans.

4. Work-Study Program

These are programs that allow both under and post-graduate students to take up work available at their school or college. It’s an excellent way to earn money and finance your studies, at the same time earn some experience in a field related to your course or degree. Work-study programs won’t finance all of your schooling expenses, but when used along with your grants and scholarships, there’s a good potential to graduate with lesser student loan debt.

5. Take part-time work

If you don’t qualify for work-study programs, a viable alternative is to take up part-time work. Some students take up part-time work while in high school to prepare for college. This can be a great training ground for financial and time management, as well as enjoy an income that could finance some of the living expenses. There are numerous part-time works you can apply for, such as waiting tables, babysitting, dog walking and other odd jobs.

Personal Loans to Fill in Gaps in Your College Expenses

Listed above are the most popular financing methods to get yourself through college, but sometimes life just doesn’t work out like you like it. The cost of higher education is rising year after year, and so are the prices of common commodities like food and gas. Add the fact that unexpected expenses do come up from time to time, like having a busted tire one week then getting a speeding ticket the next.

Fortunately, even college students can tap into personal loans to solve the financial gaps and ease some of the financial stress.

What’s a Personal Loan?

A personal loan is a type of unsecured loan. It is a multi-purpose loan which can be used for a variety of expenses, housing, food, groceries, transportation, and yes, education. Personal loans can also be used to pay off your existing debts.

As an unsecured loan, personal loans do not require collateral. Personal loans typically have fixed amount, interest rate and repayment terms. Loan terms vary from one lender to the next, but most of them can range from six months to a few years.

Qualifying for personal loans is easier than other secured loans because you don’t have to present collateral. Instead, the lender will take a look at your credit standing, employment history, and income stability. Basically, if you have a good credit score, you’ll also score a higher loan amount and lower interest rate.

Moreover, having fixed repayment terms makes it easier and more convenient for borrowers. You know how much you need to pay for each month and when your loan ends. It is important to note though that personal loans aren’t revolving loans. It means that you need to finish paying up the existing loan before you can apply for another one. Still, given the convenience and flexibility of personal loans, college students can take advantage of this financing instrument should they find themselves in a rough financial patch.

What Expenses Can a Personal Loan Cover?

There’s no denying that being in college can cost so much. From the obvious expenses like tuition, books, and housing, students also need to deal with personal spendings, such as medication when they get sick, food to eat, gas for their cars and variety of other living expenses. When cash fall short and part-time income is no longer sufficient to bridge these financial gaps, personal loans become a viable solution.

Personal loans are multi-purpose loans. When you apply to get approved for personal loans, you can already start using the funds to your discretion. Unlike student loans which need to be spent to education-related expenses only, students taking personal loans can use the money in virtually any way they want.

How Can a College Student Get a Personal Loan?

The requirements to qualify for personal loans differ from one lender to the next. However, they do have some common factors which include credit report, proof of income, proof of identity and a bank account.

The credit score can be a legitimate concern for student borrowers, especially since they’re just starting to establish credit or they don’t have a credit history yet. Most lenders favor borrowers with better credit score since they’re also perceived to be low-risk. Students who have zero to little credit history are viewed as high-risk borrowers.

If you still don’t have enough credit history to demonstrate financial responsibility, the next best course of action is to get a co-signer. A co-signer is a person who guarantees that you’ll pay the loan back. You could get a parent, older sibling or any other individual ideally with a good credit score to co-sign for you. The downside for the co-signer is that if you become delinquent or default on your personal loan, he or she becomes responsible for the debt.

Now, if you have a pleasing credit history or are able to get someone to co-sign the loan, you can start the application process. Simply submit the required documents and when approved, the lender will just deposit the funds into your bank account. The repayment process begins almost right away you get the money, so make sure to read the fine print carefully.

If you’re unable to get a personal loan from mainstream lenders, do note that there are private lenders who can provide bad credit personal loans. The requirements are more lenient and the processing and approval process is much faster.

The Best Way to Use Personal Loans

Personal loans are handy and useful, but just like any other debt, you need to pay them back with interest. You’re probably already juggling student aid and your own earning while in college, so you at least have some background and experience in adult financial management.

It is important to take personal loans seriously. With that said, you need to try to first manage your finances, and second, determine all the possible solutions to your financial dilemma. Just because you are able to take personal loans doesn’t mean you should take them and spend for frivolous expenses. It’s always better to save for that lavish spring break vacation months ahead than charge the expense to personal loans at the last minute.

However, if you ever find yourself in a rough financial patch, such as needing to replace your old damaged computer with a new one or spend out-of-the-pocket for a medical procedure, then taking personal loans is a viable solution. The best thing is that personal loans can easily and quickly fill the gaps where your part-time income and financial aid don’t suffice.

RECAP

In this imperfect world, we should expect the unexpected. Students are not always in the position to finance all of their educational needs immediately, but it’s good that there are a lot of options out there. You just need to remember that taking on debt is not a light matter, so inspect your personal and financial circumstance from all angles and narrow down all the best possible solutions.

You might find personal loans as one of these options at one point or another. These loans are quickly processed and are very accessible even at the last minute, presenting you an excellent way to deal with unplanned expenses in a timely manner. And as long as you manage your finances responsibly and be rational with your spending, you should be able to go through college with relatively lesser financial stress.

Disclaimer: Content found on loanreviewhq.com has been created to be used for informational purposes only and help readers achieve a basic understanding of their finances and financial options. The content is not intended to replace or usurp financial advice from professional accountants, CPAs, etc. If you you’re seeking financial advice, always present any questions you may have regarding your finances to a professional. Never disregard professional advice because of something you read on the internet.