Please note: high-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
Loans for students
When unexpected costs pop up, as a student it can be tough to get by. Thankfully, there are various options available to you that can give a helping hand.
Most students have to operate on a shoestring budget. That means you could be left without funds when unexpected costs pop up during your studies, especially if you’re unable to hold down a part-time job during this time.
What are my loan options as a student?
When you find yourself with a financial shortfall, one option is to borrow money from friends or family, to avoid interest charges. If the Bank of Mum and Dad is closed, however, and the expenditure can’t be put off, you might want to consider the following alternatives.
Will I be eligible for a loan?
All lenders will put applicants through both a search with a credit reference agency (CRA) and their own internal affordability and risk assessments. As a student, you may have a very limited credit history – especially if you’ve gone straight from school into higher education, and/or a lower income. Your circumstances may also be considered more changeable (and therefore more risky) to a lender.
Realistically it can be harder for you to get access to traditional credit. The good news, however, is that many of the options above are specifically tailored to people in your situation.
Always check the eligibility criteria of the specific product you are considering before applying – as well as wasting your time, multiple applications for credit in a short space of time can damage your credit score. Most lenders now offer a “soft search” facility, where would-be borrowers can check their likelihood of being approved for a loan or credit card before submitting a full application, and without affecting their credit record.
How to build a good credit record
You may not have realised that you can improve you credit record by getting on the local electoral roll, and by setting up a current account with a few direct debits. If you can put a little into savings each month, even better, although that’s simply not possible for many students. Perhaps the most important thing you can do is to keep up with any bill payments and not dip into an unauthorised overdraft. Such actions will remain on your credit record for a number of years.
Dos and don’ts of loans for students
- Compare options to get the most affordable form of credit you can get your hands on
- Check your credit report to see what you’re likely to be approved for
- Pay any loans back on time
- Seek assistance from student services
- Borrow more than you can afford to pay back
- Borrow money for non-essential items
- Make multiple applications for credit in a short time
- Regularly rely on short-term loans to fund your lifestyle
The bottom line
Always try all the 0% interest options first when you’re looking to borrow money. These could be loans from friends and family, a hardship fund, an arranged student overdraft or a student credit card. With the latter two options, the interest will eventually ramp up, so it’s best to pay it back before that point.
Only when all of these options are exhausted is it time to consider high-interest options such as credit-builder credit cards or personal loans. In this situation, it’s useful to compare the amount of interest you’ll owe, while also considering what form of credit you’re likely to be considered for.
With all these options available, a short-term financial shortfall shouldn’t be the end of the world for you. By searching for the best loan option and paying your debt on time, you’ll hopefully be back on your feet in no time.
Discover whether you're eligible for student finance, how much money you might get and how the repayments work with our ultimate guide to student finance. Read more…
Find our best student discounts, deals and guides to help to stretch your loan even further. From fashion to banking, here's all you need to know. Read more…
Discover the most reliable means for migrants and international students to borrow money in the UK Read more…
If you're planning to apply for a personal loan, credit card or mortgage, find out how student loan debt could affect your ability to be approved. Read more…
Ask an Expert