Personal Loans for Students
Personal loans might be an option for students who need additional funds after financial aid. You can find a lender that specializes in personal loans for students. Before jumping in, however, make sure you know what you’re getting into—and what might be a better idea.
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College costs continue to rise each year, leaving many students looking for ways to meet all of their educational expenses. Attending school requires funds for more than just tuition, books, and a dorm room. If you live off-campus, you may have additional living expenses for everything from rent to utilities, groceries, and much more. Even if you live at home, the commuting costs can be quite expensive.
After federal student loans, scholarships, grants, funding from parents or savings, and private student loans, many students find that they still don’t have what they need to effectively cover their costs associated with college.
If you’re finding yourself in that position after exhausting all other options, there’s one more option you might qualify for—a personal loan.
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Can College Students Take Out a Personal Loan?
Personal loans are offered by banks, credit unions, and other types of lenders. Because they’re usually unsecured and therefore high-risk loans for the lender, they often come with higher interest rates and fees—or lower loan amount limits.
In most cases, qualifying for a personal loan requires both a good credit history and steady income. This shows the lender that you not only can afford to make the loan payment each month, but that you are likely to do so. Most college students have a hard time meeting those requirements; they’re often not employed or don’t make enough money, and they don’t have much of a credit history built up, if any.
While getting a cosigner, such as a parent, can help the odds of a student getting approved for a personal loan, that option isn’t always available or desirable. There is, however, one lender that specializes in personal loans for college students.
Boro: A Lender That Offers Personal Loans for Students
According to its website, Boro is a lender “committed to providing affordable and convenient financing solutions to those who are denied credit by traditional lenders.” That includes college students, who often have a hard time getting approved for any loan products, let alone unsecured personal loans.
Eligibility Requirements
What sets Boro apart from other financial institutions is the eligibility requirements. There’s no credit history, Social Security Number, or cosigner required. Instead, to qualify, you need to be at least 18, enrolled in a U.S. college or university, have a minimum grade point average of 2.0 for undergraduates or 3.0 for graduate students, and be a U.S. citizen, legal resident, or valid visa holder. To prove that you meet the criteria, you’ll need a student ID if you’re a U.S. citizen. For international students, your passport and student visa are necessary, as well as proof of a frequently used bank account in the United States.
Boro doesn’t lend in all states, but it does lend in: Alabama, Arizona, Arkansas, California, Florida, Illinois, Indiana, Iowa, Michigan, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Utah, Washington, and Wisconsin.
Interest Rates & Terms
Loan rates range from 15.9% APR to 19.9%, but your personal rate is dependent on your profile, loan amount, term, educational background, and other factors, making it ideal for college students. The average APR on their loans – which range from $1,000 to $3,000 – is about 18.9%. While that’s higher than many other lenders, Boro is also the only lender that specifically caters to the college student population. With most other lenders, students can’t get loan approval without a cosigner.
Boro offers repayment plans ranging from 12 to 36 months. The longer your repayment term, the more your loan will cost in total and vice-versa for shorter terms.
Application Process
To apply for a personal loan with Boro, you simply choose the loan product you’re interested in, complete your loan application, and wait to see if you are eligible. If you’re approved, you can electronically sign your loan agreement and set up an automatic monthly payment. The proceeds from your new loan will be in your bank account within 24 hours—sometimes the same business day.
Downsides
The downsides of Boro’s loans include high interest rates and purely online structure. If you’re used to going into a bank branch to speak to someone, you might feel a bit uncomfortable doing it all online. It’s also more debt which can hurt your credit score and cost you much more in the long run if you don’t manage it appropriately.
Why Personal Loans May Not Make Sense for Students
Just because the option of a personal loan is available to some students doesn’t always mean it’s a good option. For most students, finding a solid lender who’s willing to offer bad credit personal loans can be extremely difficult.
Even with a cosigner—if you can get one—an unsecured personal loan can be expensive in the long term. At even an average rate of 18% APR, a $2,000 loan will cost you around $2,200 over 12 months. Most personal loans have much shorter terms than other kinds of loans; a 12-month or 24-month term is fairly standard. In a 24-month term, that $2,000 ends up costing around $2,350.
If you’re a college student who already has student loans, you may want to think twice about taking out a personal loan in addition unless you can find a loan with a good interest rate and can afford the payments, which will start immediately instead of after you finish school.
Alternatives to Personal Loans for Students
If the idea of a personal loan doesn’t sound very advantageous, you might want to look into other options first. Federal financial aid, for example, in the larger sense, is always a better option than a personal loan. Even most private student loan options will offer better rates and a more manageable repayment process.
Emergency Grants
Some schools offer grants to students who have emergency financial needs. Check with your financial aid office to see what’s available. For example, in Minnesota, some schools offer grants of $500 to $1,000 to students who are in serious financial distress, including homelessness and food insecurity.
Federal Student Loans
If you find yourself in need money after you’ve exhausted scholarships, grants, and savings, federal loans – including Direct Loans and PLUS Loans – should be your next choice. They come with many benefits, tax advantages, and flexible repayment options, and all come with a grace period meaning that you don’t have to start repayment until six to nine months after graduation.
They also typically have the lowest interest rates of any personal loans or student loans on the market. Your parents can also take out additional student loans, in the form of Parent PLUS Loans, to help you if necessary.
Private Student Loans
The next best loan option for students are private student loans. While these private loans are offered by banks, credit unions, and lenders at typically higher interest rates (as compared to federal student loans) and with fewer benefits, they’re also somewhat comparable when it comes to loan terms and have lower interest rates than most personal loans that students may qualify for.
Some private lenders allow for interest-only payments or full deferment while borrowers are in school, and many also come with rate discounts for automatic payments or high GPAs. In addition, many private student loan lenders, such as Sallie Mae, have no or low loan fees which can help you save money over time.
Credit Cards
Getting a credit card is easy. Staying on top of the payments, however, isn’t always as simple. Various student credit cards exist, and many of them come with decent interest rates and decent rewards.
While using one of the best credit cards for everyday expenses can be tempting, they can get dangerous fast if you’re not paying your bill off each month. If you can discipline yourself to only use your card for what you can afford to purchase with cash—and then pay off you bill every month—you can see your credit rating increase quickly, which can help you become eligible for better credit offers.
Whatever choice you make, ensure that you can afford it and have a plan for repayment. The decisions you make now while in college will affect your finances for years to come; be smart, financially savvy, and reap the rewards later.
