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

Compare personal loans vs. student loans

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Which should you use to pay for your education?

When it comes to paying for school and even paying off your student debt after college, you have multiple financing options. Two of these are personal loans and student loans. But which is right for your situation? Read further to see how personal loans and student loans compare.

Prosper

Personal loans through Prosper

You could borrow up to $35,000 for a variety of purposes, with rates from 5.99%–35.99%%.

  • Recommended Credit Score: 640 or higher
  • Minimum Loan Amount: $2,000
  • Maximum Loan Amount: $35,000
  • Loan Term: 3 or 5 years
  • Turnaround Time: 1-3 business days
  • Simple online application process
  • No prepayment penalties

    How do personal loans differ from student loans?

    A personal loan is a type of financing that can be used for just about any purpose. You can generally borrow up to $50,000 (though some lenders offer more) and pay it back with terms that range from one to seven years.

    A student loan is restricted for educational use — things like tuition and housing while in school. If you’ve graduated from college already, you may be interested in student loan refinancing, which is a loan to pay off your existing student debt at a lower interest rate.

    Here’s how personal loans and student loans differ in five important categories:

    • How you can use your funds. If you get a personal loan, you can use the money for just about any legitimate purpose. But with a student loan, you’re required to use the funds toward education-related expenses.
    • How you receive your money. With a personal loan, the lender deposits your approved funds directly in your bank account. Whereas with your typical student loan, a lender disburses your funds directly to your school’s financial aid office first, then you can claim any remaining amount to use for other education-related expenses.
    • Types of lenders available. You’ll find many banks, credit unions and online lenders that offer personal loans. With student loans, you can choose from private lenders or loans funded by the federal government.
    • How you repay your loan. Personal loans generally require that you start repayments after the first month. With a student loan, you’ll start repayments after graduation, often after a grace period of at least six months. Some loans allow you to start payments while still in school at low fixed amounts of $50 to $100.
    • Tax benefits. A personal loan comes with virtually no tax benefits. But with a student loan, you’re often able to deduct the interest you’ve paid from your annual taxes.

    Quick snapshot: Five ways personal loans and student loans differ

    Personal loan Student loan
    Use of funds Any legitimate purposeEducation-related expenses only
    Receiving funds Direct deposit to bank accountSchool financial aid office receives funds while you’re in school; if refinancing after graduation, you’ll receive the funds
    Lender type Banks, credit unions and private online lendersFederal government, banks and private online lenders
    Repayment terms Generally start repayments after the first monthStart repayments after graduation, often after a grace period of at least six months; refinancing loans tend to allow pausing payments in the event of job loss
    Tax benefits NoneInterest paid is often deducible from your annual taxes<

    Compare top online personal loans and student loans

    A selection of loan offers from the best personal loan providers

    Rates last updated April 26th, 2018

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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
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    580
    $100,000
    4.99%–35.99% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    580
    $100,000
    3.09%–35.99% (fixed)
    Upgrade Personal Loans*
    Affordable loans with two simple repayment terms and no prepayment penalties.
    620
    $50,000
    5.96%–35.97% (fixed)
    Prosper
    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
    640
    $35,000
    5.99%–35.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    660
    $40,000
    5.98%–35.89% (fixed)
    CompareFirst Personal Loans
    An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
    580
    $50,000
    2.99%–36% (fixed)
    Best Egg Personal Loans
    A prime lender with multiple repayment methods.
    640
    $35,000
    5.99%–29.99% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    640
    $35,000
    4.99%–29.99% (fixed)
    Laurel Road Personal Loans
    Get a personal loan with no application or origination fees and a rate discount for autopay.
    680
    $45,000
    5.5%–11.74% (fixed)
    LendingPoint Personal Loans
    Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
    600
    $25,000
    15.49%–34.99% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    550
    $10,000
    34%–155% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    Varies
    $25,000
    typically around 18.49%* (fixed)

    Compare up to 4 providers

    A selection of loan offers from the best student lenders

    Rates last updated April 26th, 2018
    Name Product Minimum Credit Score Max. Loan Amount APR Product Description
    SoFi Student Loan Refinancing Variable Rate (with Autopay)
    Good to excellent credit
    full balance of your qualified education loans
    2.54%–7.38% (variable)
    A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.
    LendKey Student Loan Refinancing (with AutoPay)
    660
    $300,000
    2.56%–18% (variable)
    Find competitive rates and unmatched loan benefits from LendKey’s network of not-for-profit lenders.
    Education Loan Finance Student Loan Refinancing
    Good to excellent credit
    None
    3.09%–6.69% (fixed)
    Lower your student debt costs with manageable payments, affordable rates and flexible terms.
    EDvestinU Consolidation & Refinancing Program
    700
    $200,000
    3.82%–7.42% (variable)
    Earnest Student Loan Refinancing Variable Rate (w/ autopay)
    650
    no maximum
    2.57%–5.87% (variable)
    Get a tailored interest rate and repayment plan with no hidden fees.
    LendingTree Student Loans
    Good to excellent credit
    Varies by lender
    2.55%–9.75% (fixed)
    Compare multiple student loans and student loan refinancing options in one place.
    Purefy Student Loan Refinancing
    620
    $90,000
    2.00%–7.98% (variable)
    Refinance all types of student loans — including federal and parent PLUS loans.
    Credible Student Loan Refinancing
    Good to excellent credit
    None
    As low as 2.57% (variable)
    Get prequalified offers from top student loan refinancing providers in one place.

    Compare up to 4 providers

    What are the benefits of personal loans and student loans?

    Personal loans

    • Use funds for any purpose. You’re free to use the money you get from a personal loan to travel, buy a car or just about any other purpose. You can also use a personal loan to consolidate your debt, including credit card balances and other loans.
    • It’s simple to apply. You won’t need to provide the kind of details that student loans require. So you won’t have to gather all those documents 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 could also qualify for a government-subsidized loan, like a Stafford Loan, which could come with even lower rates.
    • Repayment flexibility. Depending on your loan and lender, you may be able to make interest-only and even no payments at all while you’re studying. Student loans tend to come with longer repayment terms of up to 20 years.
    • Tax-deductible. With most student loans, you can write off the interest you’ve paid to reduce your overall taxable income.

    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?

    Personal loans can be better when you’re looking for extra money that extends beyond education-related expenses — like paying for a destination wedding, buying a boat or getting over a financial hump.

    But if you’re going to college or recently graduated, a student loan or student loan refinancing — with lower rates and more flexible terms — can be your better bet.

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