Finance & Business

Jan 30 2017

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Personal Loans for Students

Staff Writers May 6, 2013

Personal college loans are similar to private and alternative loans. in that they are provided by credit unions, banks, and other private entities and go directly into the hands of the borrower. However, whereas private loans are designed to pay tuition fees, personal student loans cover other college expenses. A personal student loan may cover the cost of housing, travel, laptops or computers, textbooks, and other supplies. In fact, the borrower is able to spend the money however they choose because the money is not dispensed through the university as it would be in a federal loan.

Eligibility Requirements

Personal loans are more difficult to come by than other loans, as they are less prevalent and usually have strict qualification requirements. Lenders will only consider students who either have acceptable credit scores or a credit-worthy cosigner. The student and their cosigner will need to sign a legally binding contract agreeing to their financial responsibility for the loan including interest until it is repaid in full. The lender will also likely want to see proof of the student s personal income. Naturally, all personal student loan candidates must be enrolled in a degree program at a college or university in at least a half-time status.

Repaying a Personal Student Loan

Repayment plans for personal student loans depend largely on the private lenders policies. Determining factors will include the interest rate, the student or cosigner s credit history, what the loan is being used for, and the total amount borrowed. In a personal loan, interest begins to collect at disbursement and is added to the loan principle if the student defers. Students can often reduce their loan fees if they choose to have their monthly payments automatically withdrawn from their bank account at each pay period. They may also be able to negotiate lower interest rates if they use a cosigner with admirable credit history. Students should pay attention to clauses in their loan agreement such as early repayment penalties, which charge a fee when a student makes a payment on their loan before it is due each month. Lastly, a borrower may never default on a personal student loan.

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