Personal loans vs student loans: Which has better value? | finder.com
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Compare personal loans vs. student loans

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With each offering its own benefits, we help guide you toward the best decision for your wallet.

There are some solid benefits to both personal loans and student loans when it comes to paying for school. Personal loans have less limits on how you spend your funds but student loans are typically more flexible. Which option is right for you depends on your unique situation.

Our top pick: LendingClub Personal Loan

  • Min. Credit Score Required: 640
  • Min. Loan Amount: $1,000
  • Max. Loan Amount: $40,000
  • APR: 6.95% to 35.89%
  • Requirements: US citizen or permanent resident, verifiable bank account, steady source of income, ages 18+.
  • No prepayment penalties
  • Flexible loan terms
  • Fast and easy application

Our top pick: LendingClub Personal Loan

A peer-to-peer lender offering fair rates based on your credit score.

  • Min. Credit Score Required: 640
  • Min. Loan Amount: $1,000
  • Max. Loan Amount: $40,000
  • APR: 6.95% to 35.89%
  • Requirements: US citizen or permanent resident, verifiable bank account, steady source of income, ages 18+.
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Quick snapshot: 6 ways personal loans and student loans differ

Personal loan Student loan
Loan purposeNearly any legitimate purpose, though some restrictions may applyMay only be used for secondary education expenses
DisbursementMany lenders can directly deposit your funds into a bank accountYour school’s financial aid office receives your loan funds
Potential lendersBanks, credit unions and private online lendersFederal government, banks and private online lenders
Repayment termsRepayments generally start after the first monthRepayments generally start after a grace period of at least six months after graduation
Tax benefitsNoneInterest paid is often deductible from your annual taxes
DischargeCan be discharged through bankruptcyMuch more difficult to discharge; may require a court appeal

Compare top online personal loans and student loans

Updated May 24th, 2019
Name Product Filter Values Minimum Credit Score Max. Loan Amount APR
$25,000
7.99% to 15.99%
No green card? No problem. You could still qualify for a personal loan.
620
$40,000
5.99% to 26.99%
Consolidate debt and more with these low-interest loans. Cosigners welcome.

Compare up to 4 providers

A selection of loan offers from the best personal loan providers

Updated May 24th, 2019
Name Product Filter Values Minimum Credit Score Max. Loan Amount APR
550
$100,000
3.99% to 35.99%
Quickly compare multiple online lenders with competitive rates depending on your credit.
680
$100,000
5.99% to 16.24%
No fees. Multiple member perks such as community events and career coaching.
640
$40,000
6.95% to 35.89%
A peer-to-peer lender offering fair rates based on your credit score.
Good to excellent credit
$100,000
5.34% to 35.99%
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
620
$50,000
7.99% to 35.89%
Affordable loans with two simple repayment terms and no prepayment penalties.
550
$100,000
3.84% to 35.99%
Get connected to competitive loan offers instantly from top online consumer lenders.
550
$10,000
34% to 155% (Varies by state)
Check eligibility in minutes and get a personalized quote without affecting your credit score.
640 FICO®
$35,000
5.99% to 29.99%
A prime lender with multiple repayment methods.

Compare up to 4 providers

A selection of loan offers from the best student lenders

Updated May 24th, 2019
Name Product Min. Credit Score Maximum Loan Amount APR
680
None
3.39% to 6.69%
Lower your student debt costs with manageable payments, affordable rates and flexible terms.
Good to excellent credit
None
Starting at 2.8%
Get prequalified offers from top student loan refinancing providers in one place.
650
None
2.49% to 7.27%
Get a tailored interest rate and repayment plan with no hidden fees.
650
Full balance of your qualified education loans
2.49% to 6.65%
A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.
700
$300,000
Starting at 3.75%
Save on your student loans with this market-leading newcomer.
620
$300,000
3.01% to 8.61%
Refinance all types of student loans — including federal and parent PLUS loans.

Compare up to 4 providers

What’s the difference between a student loan and a personal loan?

Personal loans can be used for just about anything, though some lenders restrict how you spend your loan funds. On the other hand, student loans have just one purpose: being used for secondary education expenses.

These differences mean you need to break down a few points to see how they compare.

What are the benefits of personal loans and student loans?

Personal loans

  • Use funds for any purpose. In general, you’re free to use the money you receive from a personal loan for just about anything, although your loan contract may prohibit you from spending your money on anything beyond the original purpose.
  • It’s simple to apply. Personal loans have much less strenuous requirements than student loans. You won’t need to have any documentation verifying your education with a personal loan.

Student loans

  • Lower interest. Student loans often come with lower interest rates when compared to general personal loans. You may qualify for a government-subsidized loan, which could come with even lower rates.
  • Repayment flexibility. Depending on your loan and lender, you may be able to make interest-only or no payments at all while you’re studying. Student loans also tend to come with longer repayment terms of up to 20 years.

What are the drawbacks of personal loans and student loans?

Personal loans

  • Higher interest. The interest rates that come with personal loans are often higher than specialized loans designed for cars, education or housing.
  • Repayments start immediately. You get no grace period when it comes to payments. Instead, you’ll start paying toward your loan’s principal and interest soon after approval. Most personal loan lenders also don’t offer benefits that protect you in the event of financial hardship.

Student loans

  • Funds restricted to education. You must use your funds toward tuition, textbooks, housing and other education-related expenses.
  • It’s easy to borrow too much. When facing the cost of tuition, housing and other potential expenses, you can end up overestimating how much you actually need. Remember that you’re paying interest on the full amount.

Which borrowing option is better suited for me?

A personal loan may be a better option if you need money for more than just education. They can help with day-to-day expenses that may come up, or your loan funds can be used to pay for a unique trip during your college experience that you may not be able to take without a little extra funding.

However, if you know you’ll want a long term and more flexibility when it comes to payment, a student loan may be a better choice. Because they have lower interest rates and don’t require you to start paying back immediately, you can focus on your education without needing a job or payment plan.

Compare personal loans to even more borrowing options

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Bottom line

Personal loans and student loans have their own unique features that make them regular borrowing choices for students across the US. If you’re looking for quick turnaround and only need a small loan, a personal loan may be better for your budget. But if you’re going to need to pay for four years of education expenses, the low interest and payment flexibility of a student loan may be more appealing.

You can read more about how student loans work and personal loans work by ready our guides. Carefully compare your loan options and weigh all the benefits with the drawbacks. After all, you’ll be paying for the next few years of your life.

Frequently asked questions

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US Personal Loans Offers

Important Information*
Logo for Credible Personal Loans
Credible Personal Loans

Get personalized rates in minutes and then choose a loan offer from several top online lenders.

Logo for Even Financial Personal Loans
Even Financial Personal Loans

Get connected to competitive loan offers instantly from top online consumer lenders.

Logo for LendingClub Personal Loan
LendingClub Personal Loan

A peer-to-peer lender offering fair rates based on your credit score.

Logo for SoFi Personal Loan Fixed Rate (with Autopay)
SoFi Personal Loan Fixed Rate (with Autopay)

No fees. Multiple member perks such as community events and career coaching.

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US Personal Loans Offers

Important Information*
Logo for Credible Personal Loans
Credible Personal Loans

Get personalized rates in minutes and then choose a loan offer from several top online lenders.

Logo for Even Financial Personal Loans
Even Financial Personal Loans

Get connected to competitive loan offers instantly from top online consumer lenders.

Logo for LendingClub Personal Loan
LendingClub Personal Loan

A peer-to-peer lender offering fair rates based on your credit score.

Logo for SoFi Personal Loan Fixed Rate (with Autopay)
SoFi Personal Loan Fixed Rate (with Autopay)

No fees. Multiple member perks such as community events and career coaching.

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