Higher education in the United States can be expensive, with students spending an average of $41,426 annually on tuition fees alone. Add to this the costs of housing, food, transportation, etc. and these numbers can reach up to $60,000. Fortunately, there are funding options available for those who need financial assistance. Among these are student personal loans.
What Is a Student Personal Loan?
A personal or private student loan is a form of non-federal funding offered by financial institutions like banks, credit unions, online lenders, etc. Apart from tuition fees, they can also be used to pay for other school-related expenses such as:
- School supplies and equipment
- Transportation to and from the campus
- Study abroad programs
What Are the Benefits of Student Personal Loans?
A personal loan is a great option for students who have maxed out their federal aid. When utilized correctly, it can provide a string of benefits. Here are some of them:
A Higher Borrowing Limit
With federal funding, you can only borrow a maximum total of $57,500. Personal loans, on the other hand, enable you to take out an amount not exceeding the total of your school’s cost of attendance. However, keep in mind that the annual borrowing limit will depend on your chosen lender.
A Faster Application Process
Unlike federal loans, you don’t have to apply for a Free Application for Federal Student Aid (FAFSA) with the government. That’s one less step to worry about. Additionally, most private lenders will also give you the option to apply for their program online.
Offers Flexible Payment Terms
The repayment period will also depend on the lender. Some institutions will give you the freedom to choose from 5, 10, or 15-year terms. Moreover, you’ll also be given the option to fulfill payments while you’re still in school or defer them until six months after you graduate.
How Can I Apply for One?
Securing a student personal loan is not an easy process. Preparation and proper planning will be needed. If you’re thinking of applying for one, here are some criteria you must meet:
Must Meet the Age Requirement
The minimum age requirement may vary depending on your chosen financial institution. Typically, most lenders require students to be at least 16-18 years of age at the time of application.
A Steady Source of Income
Getting a job that pays well can help boost your application. Fortunately, there are many part-time jobs that you can explore. This includes giving private tutorial sessions, housesitting, babysitting, barista work, and more. If it interests you, you can also open a small online shop or sell your preloved items online.
A Good Credit History
Private loans will require student borrowers to have a good credit score. Having a higher rating will enable you to secure financial assistance with lower interest rates.
Technically, having a cosigner is not required. However, for borrowers with poor credit and an unstable income, opting for one is recommended. This person will share the responsibility of paying for the loan, in case you’re incapable of doing so. Here are some important points to remember if you’re going for this option:
- Relationship – Cosigners are not only limited to parents. They can also be your guardians, friends, relatives, and so on. Anyone can assume this role as long as they have the willingness to do so.
- Credit Standing – Credit score requirements will vary from lender to lender. However, having cosigners who fall within the range of 720 and higher will most likely increase your chances of getting approved for a loan.
- Source of Income – Lenders want to know that your cosigner is fully capable of repaying the loan amount. So, choose someone with a stable source of income.
In addition to these, lenders will also require you and your cosigner to submit some official documents:
- Gross annual income
- Proof of employment
- Personal tax returns
- Personal assets and their value
- Monthly rent
A student personal loan can be considered a huge financial obligation. It is crucial to do your research first and compare different financial institutions before applying for one. Doing so will enable you to secure a private student loan that will best suit your needs.