While it is always best to first consider the more conventional financial aid options, such as grants, scholarships, and student loans before you go ahead and begin to look at some of the more exotic alternatives such as personal loans to pay for college, sometimes these alternative financing instruments can bail you out when you have exhausted your other options.
While most students don’t end up taking out a personal loan to pay for their higher education, it may be something that you at least have on your radar if you need to come up with some additional funding that you couldn’t otherwise secure via more typical means. Before you begin to seriously consider getting a personal loan for college, you first must know some fundamental information about this kind of loan product.
Personal Loans At A Glance
Personal loans aren’t really that much different than your standard private student loan, as they are unsecured loans that can be made in denominations that range from only a few hundred dollars, all the way up to several tens of thousands of dollars.
They are based on credit, and in general abide by the same sort of approval criteria that you would normally see with a private education loan. This means that you will need to have good credit, or a creditworthy cosigner to get an approval.
Most lenders that provide personal loans will also want to take a close look at your income, and expense profile. They will typically want to see proof of your income in the form of a pay stub, or tax return, and they will also probably want to calculate your debt to income ratio in order to see if you can pass their set guidelines for this metric.
Personal loans are generally more difficult to get approved for than most private student loans due to the fact that they can easily be discharged in bankruptcy, and most personal loan lenders will have an even stricter credit and income policy when compared to private education loan lenders.
Finding a Lender and a Loan
There are more personal loan lenders than student loan lenders in today’s marketplace, and you should have no trouble locating a lender that will at least take a look at your application. The real key is finding a lender that you can trust, and one that can provide you with a good deal.
Most of the major banks have some sort of personal loan product available, and most of these financial institutions have websites that you can visit in order to apply.
Due to the bad economy, and overall tightening of the credit markets over the past few years, most personal loan lenders will want to see that you have at least very good credit, and I wouldn’t recommend applying without having at least a credit score that is above a 700.
This of course holds true for your cosigner as well, and it is also a wise move to make sure that you have the appropriate income in place before you go ahead and apply, as your income will play a very significant role in getting an approval.
When to Utilize a Personal Loan for College
Because personal loans are fairly difficult to obtain, especially for large amounts, I recommend that you exhaust your options when it comes to private student loans before you begin to take into consideration applying for a personal loan.
While most personal loans and private education loans have very similar aspects, the lenders who provide private student loans work with student borrowers on a regular basis, and can therefore accommodate you in a more efficient manner the vast majority of the time.
If your options when it comes to private college loans, and other forms of financial aid have already been exhausted, and you still need a few extra thousand dollars to pay for transportation, food, books, etc., I would then perhaps suggest looking for a personal loan, although if you had the necessary credentials in place in terms of credit to get approved for a personal loan, you probably could have gotten a private student loan just as well.
Regardless, these types of loans are at least another option you can have on your radar, and just remember to not overestimate what a personal loan can do for you.
