Personal loans vs student loans | Which is a better value?

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.

Juggling school expenses isn’t an easy task. Between dealing with the hefty cost of tuition and figuring out your housing needs, choosing the most beneficial loan option may not be at the front of your mind.

There are some solid benefits to both personal loans and student loans. Before you spend a lot of time — and money — on college, take a moment to compare both types of loan so you can make an informed decision that gets you to your degree faster.

Credible Personal Loans

Our top pick: Credible

Quickly get personal loan offers from top online lenders.

  • Minimum Loan Amount: $1,000
  • Maximum Loan Amount: $50,000
  • Loan Terms: 2–5 years
  • One simple form
  • Must have good to excellent credit

    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

    A selection of loan offers from the best personal loan providers

    Rates last updated September 24th, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

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    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Credible Personal Loans
    Get personalized rates in minutes and then choose a loan offer from several top online lenders.
    Good to excellent credit
    4.99%–36% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    3.09%–35.99% (fixed)
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    4.99%–35.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    6.16%–35.89% (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    6.990% – 14.865% (fixed)
    Payoff Personal Loans
    Pay down your debt with a fixed APR and predictable monthly payments.
    5.99%–24.99% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    34%–155% (Varies by state) (fixed)
    Best Egg Personal Loans
    A prime lender with multiple repayment methods.
    640 FICO®
    5.99%–29.99% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    4.99%–29.99% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    16.05%–35.99%* (fixed)

    Compare up to 4 providers

    A selection of loan offers from the best student lenders

    Rates last updated September 24th, 2018
    Name Product Min. Credit Score Max. Loan Amount APR Product Description
    Credible Student Loan Refinancing
    Good to excellent credit
    2.57%(As low as ) (variable)
    Get prequalified offers from top student loan refinancing providers in one place.
    SoFi Student Loan Refinancing Variable Rate (with Autopay)
    full balance of your qualified education loans
    2.570%–6.605% (variable)
    A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.
    Purefy Student Loan Refinancing
    2.57%–8.69% (variable)
    Refinance all types of student loans — including federal and parent PLUS loans.
    Earnest Student Loan Refinancing Variable Rate (w/ autopay)
    no maximum
    2.47%–5.87% (variable)
    Get a tailored interest rate and repayment plan with no hidden fees.
    PenFed Student Loan Refinancing
    3.25%–7.03% (fixed)
    Straightforward refinancing with competitive rates.
    CommonBond Student Loan Refinancing
    2.72%–7.25% (with autopay) (variable)
    Trade in your existing school loans for competitive APRs that come with a discount for autopay.
    LendKey Student Loan Refinancing (with AutoPay)
    2.51% (As low as) (variable)
    Find competitive rates and unmatched loan benefits from LendKey’s network of not-for-profit lenders.
    LendingTree Student Loans
    Good to excellent credit
    Varies by lender
    3% (As low as) (fixed)
    Compare multiple student loans and student loan refinancing options in one place.

    Compare up to 4 providers

    How do personal loans differ from student loans?

    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.

    How you can use your funds

    Personal loans can be used for just about anything, but some lenders don’t allow you to use your loan for secondary education expenses. Read the lender’s terms carefully to make sure you’re allowed to apply your loan toward the cost of college. Otherwise, you may need to take out a student loan to pay for tuition and a personal loan to pay for living expenses.

    Student loans are meant for any expenses related to attending a college or university. You can use your loan for tuition, room and board, books or any other legitimate education expense.

    How you receive your money

    A lender will deposit your loan directly into your bank account. This can be handy if you have a lot of expenses in different places, r if you need to use your loan for education and other bills, but it means you’re responsible for paying everything and making sure your money gets where it needs to go.

    Student loan lenders disburse your loan funds directly to your school’s financial aid office first. Once tuition and other university costs are paid for, you can claim any remaining amount to use for other education-related expenses. This can be especially useful if you don’t want to deal with the hassle of setting up payment to your university.

    Types of lenders available

    There are a number of personal loan lenders out there, including banks, credit unions and online lenders. Terms and interest rates vary widely, so compare your personal loan options before settling on a lender.

    With student loans, you can choose from private lenders or loans funded by the federal government. Both ways are legitimate and can often be stacked to pay for your whole education so you aren’t left footing a bill with your savings.

    How you repay your loan

    Personal loans have quick turnaround. You should expect to start paying your loan back within the first month. Since terms are also shorter, between one and seven years, you may be stuck making large monthly payments that cut into your budget and force you to work during school.

    With a student loan, you start repayments after graduation. Many student loans also have a grace period of at least six months. Some lenders even allow you to start payments while still in school at low fixed amounts of $50 to $100. This added flexibility can help you find a decent job after school or pay down interest while working part-time in college.

    Tax benefits

    A personal loan comes with virtually no tax benefits. While personal loans aren’t considered taxable income, you won’t find many other tax benefits when you borrow, even if your loan is applied to college or university costs.

    With a student loan, you may be able to deduct the interest you’ve paid from your annual taxes. This can help keep your tax bill low, especially if you’re making interest-only payments while you search for your dream job.

    Discharging your debt

    If you can no longer make payments and are forced to declare bankruptcy, you can discharge your personal loan debt. This has a huge impact on your credit, but it means that you may have your debt forgiven completely.

    Student loans don’t have this option. Even private student loans are difficult to discharge, with many requiring a court order and an appeal process that proves undue hardship. Without this, you’ll be stuck paying for your student loans no matter how bad your financial situation gets.

    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.

    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.

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