Many students look towards personal loans to help them cover all of the extra costs while in college. However, the option of a personal loan may not be the wisest financial choice, especially if a private student loan can cover the extra costs instead.
Personal loans for college students – when are they needed?
Student loans for students are not awarded for more than your school’s projected cost of attendance. Therefore, if your loan only covers your tuition, books, and fees, you might be wondering how you will afford your living expenses and groceries. This is where a personal loan can come in handy.
A personal loan is sent directly to you and allows you to control what the money is used for. The student is in charge with dictating how much money is needed, and the bank lends the student money without the school being the middleman.
Should college students avoid personal loans
The main problem with personal loans for college students is that they can be expensive. Since college students typically have lower credit scores, banks view them as a higher risk. This then gives the bank the freedom to charge high interest rates for these loans. Do you really want to be paying for your college groceries and rent way into your 30s?
Most personal loans for students will also require a co-signer. For some students, it is easy to secure a worthy co-signer, while others students will have hard time finding the ideal candidate. Personal loans might require students to also show proof of adequate income, which might also present a problem for many students.
Unfortunately, high educational costs today mean that many students will graduate with debt. For a student with few financial options, a personal loan might be necessary to be able to concentrate on schoolwork and focus on obtaining a college degree.
Private student loans for personal expenses
To cover personal expenses, private student loans might be a better option than personal loans, since students will not have to start the repayment process until after they graduate. Private student loans can cover a wide range of educational expenses, including college dorms and apartments, travel to and from school, food, study abroad opportunities, and a student computer. Not only are private student loans eligible for deferment and forbearance, but also they generally have better interest rates than personal loans. While you might not be able to fund your Cancun spring break trip with a private student loan, you are able to live on or near campus and have all of your needs paid for while going to class.
A personal loan for students might be necessary, but it is better to scour the available private student loans first find the right loan that meets your needs now and in the future.
To learn more about private student loans and compare rates, visit Credible.