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How to use a personal loan to pay for college

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They can fill in the gaps, but be smart about rates and repayment terms before signing on.

When federal or other student loans aren’t enough to cover tuition, books and everyday living expenses, a personal loan can reduce the financial pressure. These loans come with fewer restrictions on how you can use the money you borrow, and how much you can borrow isn’t tied to educational costs.

But high interest and short repayment terms could prevent you from focusing on what’s important: getting an education.

Best Egg Personal Loans

Best Egg

A prime lender with multiple repayment methods.

  • Recommended Credit Score: 640 FICO® or higher
  • APR Range: 5.99%–29.99%
  • Minimum Loan Amount: $2,000
  • Maximum Loan Amount: $35,000
  • Loan Term: 3 or 5 years
  • Fast loan processing and turnaround time

    How do personal loans for students work?

    Personal loans allow students and general borrowers to apply for amounts from $2,000 to $50,000 or more. You repay what you borrow plus interest and fees over a period of time both you and the lender agree to.

    Lenders typically express the cost of a personal loan as an APR, your annual percentage rate. APRs can range from 6% to up to 36%, but you might have a hard time qualifying for a 6% APR as a student.

    Repayment terms can range from one to seven years through monthly installments that begin shortly after you receive your funds.

    Top 5 personal loan options for students

    If your tuition’s covered but you need help with other expenses, you can take advantage of standard personal loans offered by banks and credit unions. But if you’re looking for a personal loan to help cover educational expenses, your options are more limited since most lenders restrict using a personal loan for college. Compare these online lenders that allow you to apply your funds to educational expenses.

    LenderEligibilityCosigners allowed?APR rangeLoan amountsTerms
    Best EggMust have a FICO® score of 640+ and be a US citizen or permanent resident. Not available in IA, WV, VT, PR, or GU.No5.99%–29.99%$2,000–$35,0003 or 5 years
    StiltMust be a US citizen, permanent resident or have a valid F1, OPT, H1B, H4, O1, L1, TN, J1 or DACA visa. You also must have a job and a valid US bank account and live in a serviced state.No7.99%–15.99%$1,000–$25,000Up to 2 years
    Digital Federal Credit UnionMust be a current or former employee of a participating employer; a member of a participating organization, community or condo association; or a relative of an existing member.Yes9%–18%$200–$100,000Up to 5 years
    UpstartMust have good to excellent credit and be at least 18 and a US citizen or permanent resident. No8.36%–29.99%$1,000–$50,0003 or 5 years
    BoroEnrolled in a US school, 2.0+ GPA or 3.0+ for graduate students, live in an eligible state, us resident or have applicable VISA.No15.9%–19.9%$1,000–$3,000

    Am I eligible for a personal loan?

    Many students haven’t yet built a strong credit history, which often comes with steadier footing after graduation. Because they require steady employment, a minimum income and more, a personal loan can be difficult for college students to qualify for on their own.

    You’ll need to meet common eligibility requirements that include:

    4 types of personal loans available to pay for college

    Your options for personal loans may be limited if you’re still hitting the books. But many banks and lenders accept cosigners, which can help you qualify for stronger rates and better terms than you’d find on your own.

    The best option for you will depend on your situation, budget and goals.

    1. Unsecured personal loan in your name

    • Best for graduate and part-time students with steady jobs and a credit history.

    If you’re steadily paying off student loans or credit cards while supporting your studies, you might qualify for an unsecured personal loan on your own.

    Alternative lenders like Upgrade consider your educational background when determining your eligibility. And SoFi’s personal loans come with perks like career advice and mentorship programs.

    2. Unsecured personal loan in your parent’s name

    • Best for undergrads who rely on their parents financially.

    If you’re not financially independent, you might have trouble qualifying for a personal loan even with a cosigner. Instead, you and your parents may want to consider taking out a personal loan in their name.

    If one of your parents has a high income and long history of repaying debt on time, you’ll find more competitive rates and terms than for someone who’s still in school.

    To show that you’re committed to repaying your loved ones, consider drawing up an informal agreement that includes how much you’ll pay monthly and by when. Or look to a service like Loanable, which helps you create a legally binding contract after you’ve landed a job.

    3. Unsecured personal loan with a cosigner

    • Best for students with expenses outside of tuition and other school costs.

    It’s tough to find a personal loan provider that allows you to both apply with a cosigner and put the funds toward school. But for expenses that aren’t directly related to school — like paying your off-campus rent — a cosigner might help you qualify for competitive rates.

    Review your lender’s requirements for cosigners to make sure you can meet minimum income, credit scores and more.

    4. Home equity loan

    • Best for students looking for large amounts whose parents own equity in a home.

    Home equity loans — sometimes called second mortgages — allow your parents to borrow against the equity of their home. Because their property acts as collateral for the loan, you’ll see more competitive rates than for unsecured loans.

    You can typically borrow between 80% and 90% of your home’s equity, paying it off over a longer period than a traditional personal loan. Given competitive rates and longer repayment terms, lenders like M&T Bank suggest a home equity loan as a student loan alternative.

    Personal loans vs. private student loans

    That providers limit borrowers from using personal loans for educational expenses isn’t surprising: Students just don’t have the same needs and ability to repay as your average borrower.

    Key differences between personal loans and private student loans include:

    • Interest rates. Student loans often offer lower interest rates than personal loans — typically between 2% and 20%.
    • Fees. Private student loans don’t often come with application, origination or prepayment fees. Yet these fees are common with personal loans.
    • Terms. Student loan repayment terms can range from five to 25 years. Personal loans come with much shorter terms of one to seven years.
    • Repayment. Student loans offer perks like waiting up to six months after graduation before you start repayments, deferment or interest-only payments while you’re in school, as well as multiple deferment and forbearance options after. Personal loan repayments start right away and typically won’t allow you to pause payments if you hit a financial snag.
    • Loan amounts. Student loans often start at $5,000 and top off at your school’s total cost of attendance. Personal loans come in as low as $1,000 in some cases but rarely go above $100,000.
    • Cosigners. Almost all student loan providers allow you to apply with a cosigner, which just isn’t available with a personal loan.
    • Eligibility. The rigid requirements of personal loans could prevent many students from finding financing. Still, you might not be eligible for a federal or even private student loan if you don’t attend a Title IV or degree-granting institution.

    How personal loans and student loans compare

    Should I take out a personal loan for college?

    It depends on your circumstances and finances. Ask yourself the following questions to help you decide if a personal loan is right for you.

    When to consider a personal loan

    • You’re employed and have good to excellent credit.
    • You can afford immediate repayments.
    • You have limited educational expenses and a creditworthy cosigner.
    • You aren’t eligible for public or private student loans.

    When to look elsewhere

    • You’re eligible for a private or federal student loan.
    • You’re eligible for scholarships, grants or work-study.
    • You’re not employed, have poor credit and don’t have a cosigner.
    • You’re looking to borrow $50,000 or more.

    Personal loans for international students

    Your financing options are further limited if you’re studying on an F1 visa. In this case, you’re ineligible for a federal loan and most private student loans.

    You might be able to apply with a US citizen as a cosigner on a private student loan or a personal loan. However, many require that both the cosigner and student are US citizens or permanent residents.

    You’ll also find lenders that specialize in financing for noncitizens, like Stilt or Boro. Stilt offers personal loans that you can use toward school, and it doesn’t require a credit score. Boro specializes in personal loans for international college students and doesn’t ask for a Social Security number when you apply.

    Student loan options for international students

    Personal loan alternatives for college students

    Personal loans aren’t the only option for students needing help with extra expenses before they graduate.

    • Income share agreement (ISA). An ISA allows students to pledge a percentage of their income for a set number of years in exchange for tuition. Universities like Purdue offer it directly, but if yours doesn’t, you can apply through an ISA provider like Align.
    • Crowdfunding. Got a particular project or goal you need to fund — like paying for study abroad? Consider setting up a campaign on Kickstarter or GoFundMe to raise money from your peers and social network.
    • Get a side gig. Making a little extra money on the side might be easier than you think. It can be as simple as selling your photos instead of posting them on Instagram or offering services you’re already proficient at, like editing or furniture assembly.

    Bottom line

    Personal loans aren’t designed for students. You generally need a job, strong credit and the ability to repay what you owe right away.

    Applying for a personal loan with a cosigner or parent can open up options, not to mention stronger rates and terms. But you just might find other sources of financing by talking with your school’s financial aid office.

    Learn more about how it all works with our comprehensive guide to student loans.

    Frequently asked questions

    Image source: Shutterstock

    Anna Serio

    Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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