Editor's choice: LendingClub personal loans
- Coapplicants welcome
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- May qualify with a credit score of 640
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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.
|Personal loan||Student loan|
|Loan purpose||Nearly any legitimate purpose, though some restrictions may apply||May only be used for secondary education expenses|
|Disbursement||Many lenders can directly deposit your funds into a bank account||Your school’s financial aid office receives your loan funds|
|Potential lenders||Banks, credit unions and private online lenders||Federal government, banks and private online lenders|
|Repayment terms||Repayments generally start after the first month||Repayments generally start after a grace period of at least six months after graduation|
|Tax benefits||None||Interest paid is often deductible from your annual taxes|
|Discharge||Can be discharged through bankruptcy||Much more difficult to discharge; may require a court appeal|
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.
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.
|Personal loan vs. Line of credit|
|Personal loan vs. Home equity loan|
|Personal loan vs. Mortgage|
|Personal loan vs. Business loan|
|Personal loan vs. 401(k) loan|
|Personal Loan vs. Home equity line of credit|
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.
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