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Can Students Get Personal Loans?

Can Students Get Personal Loans?
Jacqueline DeMarco
Jacqueline DeMarcoUpdated October 31, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
For many students, especially undergraduates, taking out a personal loan is not advisable. However, graduate students and older students going back to school may find that a personal loan can help them cover certain expenses. Read on to find out how personal loans for students work and what the pros and cons are.

Understanding Personal Loans for Students

With a personal loan for students, you get a lump sum of money from a lender which you pay back with interest in monthly installments over time. Having a strong credit history can make it easier to qualify for a personal loan and to get lower interest rates and better terms. Older students who are returning to school — perhaps as graduate students or to pursue an MBA — after being in the workforce and earning a solid income are more likely to have a strong credit history and thus qualify for more favorable loan terms and rates. In such a case, a personal loan for graduate students may make sense.Students with a high earning potential may have the best chance of paying off personal loans on time. Before applying for a personal loan, it’s a good idea to consider how much you expect to earn in the future.  

How Do Personal Loans for Students Work? 

While personal loans for college students do exist, not all students can qualify for favorable personal loan terms and rates. Having a high credit score — for reference, a FICO® score of 670 to 739 is good, 740 to 799 is very good, and 800 to 850 is exceptional — a steady income, and a low debt-to-income ratio is necessary to qualify for the best rates and terms. Personal loan lenders charge higher interest rates when they believe a borrower poses a greater risk of not paying back their loan on time. Borrowers who have low credit scores or lack a steady income may fall into that category. It may be possible for students to find a lender willing to work with them even if they have a low credit score or inconsistent income. However, the high interest rates they’re likely to pay can make the cost of borrowing money too expensive. Plus, it’s not in a student's best interest to take on more debt than they can afford. A personal loan for students with no job is generally not a good option.

Common Reasons to Take out Personal Loans as a Student 

A personal loan for unemployed students is not a good idea. However, if a student is enrolled in graduate studies, or is older and has a steady and stable income, a personal loan may help them cover a wide variety of expenses that can crop up when they’re in school. Students can use personal loans to pay for almost any expense, including:
  • Cell phone
  • Laptop or desktop computer
  • Textbooks
  • School supplies
  • Car repairs
  • Living expenses
  • Medical costs

Pros of Getting Personal Loans as a Student 

Some of the advantages of personal loans for students that you may want to keep in mind include:
  • Fast funding
  • Lower interest rate than credit cards
  • Help build your credit history by making payments on time

Cons of Getting Personal Loans as a Student 

There are also disadvantages of personal loans that students need to consider, such as:
  • You’ll pay interest on the loan and possibly additional fees as well
  • May not qualify for the best loan terms
  • Missed payments can harm your credit score and credit report
  • Taking on too much debt can cause stress which can distract from school work

Student Loans vs Personal Loans 

While a personal loan can help some students pay for expenses during their schooling, such as personal loans for laptops, it’s not advisable to use a personal loan to cover major education costs like tuition or room and board. Students should be careful about taking on debt when they don't have a steady source of income and carefully consider whether it makes sense to borrow money at this time.Student loans are a much better option for paying for school. Students can start by completing the Free Application for Federal Student Aid (FAFSA®) to see which federal student loans they qualify for. Federal student loans can only be used for education expenses and tend to come with lower interest rates than other lending products or private student loansStudents can use federal student loan funds to cover expenses such as:
  • Tuition and fees
  • Room and board
  • Textbooks
  • Computers
  • School supplies
  • Studying abroad 
  • School transportation
  • Child care expenses
  • Disability expenses

Credit Cards vs Personal Loans

Students can also use credit cards to spread out the cost of purchases they can’t afford to pay for upfront. However, credit cards generally have very high interest rates which can make it more challenging to pay down debt. Personal loans typically have lower interest rates than credit cards and a fixed repayment schedule. Personal loans may be a better fit for spreading out the cost of larger expenses, such as medical expenses, while credit cards may be useful for helping with smaller expenses like gas and groceries. 

Typical Credit Score Requirement for Personal Loans 

Personal loan requirements vary by lender. There are lenders that offer personal loans to consumers with bad credit, including personal loans for credit scores under 550 (these typically come with high interest rates and fees). However, most lenders look for applicants with a good credit score of 670 to 739. 

The Takeaway

For students, taking out a personal loan while going to school is generally not a good idea, especially if they don’t have a steady income to pay back the loan. Being approved for a loan in the first place can be difficult for students because they typically don’t have enough of a credit history. However, in the case of a financial emergency, such as a medical procedure or car repairs, if financing is needed to cover the expense, a personal loan generally has  lower interest rates than a credit card. A student needs to take their personal financial situation into account and carefully consider their ability to repay a personal loan before taking one out. 

3 Personal Loan Tips  

  1. Shopping around helps ensure that you’re getting the best deal you can. Lantern by SoFi makes this easy. With one online application, you can find and compare personal loan offers from multiple lenders.
  2. If the interest rates you’re being offered seem too high, try lowering the loan amount. Generally, the larger the loan, the greater the risk for lenders, who likely charge a higher interest rate for the increased risk level.
  3. Watch out for lenders who advertise “guaranteed” loans. Legitimate lenders will want to know your creditworthiness before offering a loan.

Photo credit: iStock/sturti
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.*To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.LCPL0822014

Frequently Asked Questions

Are students able to take out personal loans?
Can a student get a personal loan with no job?
Can students use their student loans as a source of income on a personal loan application?

About the Author

Jacqueline DeMarco

Jacqueline DeMarco

Jacqueline DeMarco is a personal finance writer and editor based in Southern California. While she spends the bulk of her time writing about complex financial issues, she also tackles a variety of subjects ranging from food to fashion to travel. Her work can be found across dozens of publications such as Credit Karma, LendingTree, Northwestern Mutual, The Everygirl, and Apartment Therapy.
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