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Should I Use a Personal Loan to Pay off My Student Loan Debt?

Using a personal loan to pay off student loans comes with several drawbacks, including higher interest rates and shorter repayment terms compared to student loan refinancing.

Kat Tretina Kat Tretina Updated December 8, 2020

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

If you’re determined to pay off your student loan debt as quickly as possible, you might be looking for creative solutions — like using a personal loan to pay off student loans.

Personal loans can give you quick access to cash, which could be helpful if you’re struggling with your student loans. You also might qualify for a low interest rate on a personal loan if you have good credit.

However, while using a personal loan to pay off student loan debt can seem like a good plan, it could be an unrealistic repayment strategy.

Here’s what you need to know before considering using a personal loan to pay off a student loan:

  • Paying off student loans with a personal loan
  • Advantages
  • Disadvantages
  • Is using a personal loan to pay off student debt right for you?

Paying off student loans with a personal loan

Using a personal loan to pay off your student loans can be appealing. With many personal loan lenders, you can submit an application online, get an instant decision, and have money deposited into your bank account quickly.

But using a personal loan to repay your student loans usually isn’t a good idea. If you want to tackle your debt, student loan refinancing could be a better option.

With refinancing, you’ll likely get a lower interest rate than you would with a personal loan. Plus, refinancing also offers longer repayment terms compared to personal loans.

 Personal loansStudent loan refinancing
Fixed rates from (APR)4.99%+ APR2.79%+
Variable rates from (APR)N/A1.95%+
Rates from Credible personal loan and student loan refinancing lenders.

Learn More: How to Refinance Your Student Loans

Advantages

Taking out a personal loan to pay off student loans could be risky, but there are also some benefits to this approach:

  • Personal loans are usually processed quickly: With student loan refinancing, it can take several days or even weeks for your existing loans to be paid off. Personal loan funds are typically disbursed much more quickly. After your loan is approved, you might get your money in as little as one business day, depending on the lender.
  • You might qualify even if you didn’t finish college: Although some lenders will refinance student loans if you didn’t finish college, many require you to have graduated to qualify for refinancing. Personal loan lenders don’t have this requirement.
  • You could release a cosigner from your student loan: If you use a personal loan to pay off a student loan, your student loan account will be closed. If you had a cosigner on your student loan, they’ll be released from the account.
  • Personal loans can be discharged in bankruptcy: Student loans are notoriously difficult to discharge in bankruptcy. Personal loans, on the other hand, aren’t subject to the same restrictions as student loans. This makes them easier to discharge if you have to declare bankruptcy later on.

Learn More: Refinancing Your Federal Student Loans

Disadvantages

While using a personal loan to pay off student loans could be tempting, here are some serious drawbacks to keep in mind:

  • Most personal loan lenders prohibit using loans to repay student debt: When you apply for a personal loan, you have to sign a loan agreement that states you’ll abide by the lender’s terms. Most personal loan lenders have strict policies that prohibit paying for school with a personal loan or refinancing existing student loans with a personal loan.
  • Personal loans have shorter repayment terms: Personal loans tend to have short repayment terms — often seven years or less. If you refinance your student loans instead, you might have as long as 20 years to repay your loans, depending on the lender and the term you choose. Federal student loan repayment options also typically come with much longer repayment terms.
  • Personal loans typically have higher interest rates: Because personal loans can be discharged in bankruptcy, lenders see them as riskier forms of debt. To offset that risk, they charge higher interest rates than you’d get with student loan refinancing. This means you could likely get a lower interest rate by refinancing.
  • Personal loans aren’t eligible for the student loan interest tax deduction: If you use a personal loan to pay off student loans instead of refinancing your debt, you’ll lose out on the student loan interest tax deduction. Depending on your income, you might be able to deduct up to $2,500 in student loan interest from your taxes, but personal loans aren’t eligible for this deduction.

Learn More: Can You Pay Your Student Loans With a Credit Card?

If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for you. You can do this easily with Credible — you can compare your rates from our partner lenders in the table below in just two minutes.

LenderFixed rates from (APR)Variable rates from (APR)
advantage education loan consolidation4.54%+N/A
brazos student loan refinancing2.70%+1.93%+
citizens bank student loans2.97%+¹ 1.99%+¹
college ave student loans3.34%+23.24%+2
elfi student loans2.79%+32.39%+3
mefa refinancing3.46%+42.51%+4
invested refinancing3.05%+3.05%+
penfed purefy student loan consolidation2.99%+2.19%+
rhode island student loan authority refinancing3.19%+N/A
sofi refinancing2.99%+52.25%+5
Compare personalized rates from multiple lenders without affecting your credit score. 100% free!

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All APRs reflect autopay and loyalty discounts where available | 1Citizens Bank Disclosures | 2College Ave Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 5SoFi Disclosures

Paying for school with a personal loan: If you need to pay for school in the first place, keep in mind that private student loans typically have lower interest rates, longer repayment terms, and more repayment options than personal loans.

For example, with a private student loan, you might be able to defer your payments while you’re in school or even have a grace period after you graduate before you have to make payments.

If you decide to take out a private student loan, be sure to compare your rates from as many lenders as possible to find the right loan for you. You can do this easily with Credible — you can see your rates from multiple lenders in just two minutes.

Find Your Student Loan

Is using a personal loan to pay off student debt right for you?

Using a personal loan to pay off student loan debt can sound like a good idea, but the downsides (like higher interest rates and shorter repayment terms) often make it an unrealistic strategy.

Refinancing your student loans is usually a better way to manage your student loan debt. Through refinancing or student loan consolidation, you could get a lower interest rate or a lower monthly payment with an extended repayment term.

If you decide to refinance, it’s a good idea to shop around and compare as many lenders as possible to find a loan that works for you. Credible makes this easy — you can see your prequalified rates from multiple lenders after filling out a single form.

Find out if refinancing is right for you

  • Compare actual rates, not ballpark estimates – Unlock rates from multiple lenders in about 2 minutes
  • Won’t impact credit score – Checking rates on Credible won’t impact your credit score
  • Data privacy – We don’t sell your information, so you won’t get calls or emails from multiple lenders

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About the author
Kat Tretina
Kat Tretina

Kat Tretina is a contributor to Credible who covers everything from student loans to personal loans to mortgages. Her work has appeared in publications like the Huffington Post, Money Magazine, MarketWatch, Business Insider, and more.

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