Guide to Personal Loans for College Students

Building a college fund is no small feat. On average, every undergraduate student has four primary funding sources, with at least 18% of college funding coming from loans. Plus, it's tough to estimate exact college costs. 

Tuition and fees are one thing, but the daily cost of living can take you by surprise. Who knew protein bars and pizza runs could be so expensive?

For college students juggling unexpected costs like car repairs, medical bills, or that unforgettable spring break trip, personal loans could be a financial game-changer. While personal loans aren't designed to cover postsecondary education costs, they can be a lifesaver for tackling other financial hurdles that college students frequently encounter.

In this article, we will review everything you need to know about personal loans (and KoraCash) to make the best funding decision.

What are personal loans for students?

So, what are personal loans for students, and how do they work? Let’s dive in! These are loans that can help college students cover the costs of their non-education related expenses. There are two main types of personal loans that you should be aware of:

• Secured Loan: Guaranteed by collateral (like a car), which the financial institution can take if you don't pay the loan. However, these loans usually come with a higher credit limit and lower interest rates. 
• Unsecured Loan: No collateral; these loans usually have lower credit limits and higher interest rates. Unless you have assets, an unsecured personal loan will be your only option.
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Both secured and unsecured loan funds can be used for many purposes, and the fund disbursement generally goes directly to the borrower. This means personal loans offer tons of flexibility in terms of usage. With personal loans, you can pay for all kinds of non-education-related adventures and emergencies. 

It’s important to note that, unlike student loan options, repayment plans for personal loans typically start right away. You can’t defer payment until after graduation, and there are typically no forbearance options (though if needed, you could look into consolidation options if you have multiple personal loans). 

Also, most personal loans have fixed interest rates. As interest rates are currently rising, it’s a good idea to determine what your expected repayment will be before signing on the loan.   

Additionally, the application process is usually speedy and could be done in a business day! However, most personal loans will involve a credit check. This means that students with limited credit history may find it difficult to qualify for a personal loan on their own and may need to have a cosigner. 

It’s best to look for a personal loan provider that understands that students may not always have good credit. This kind of institution (think credit unions and niche loan lenders) may offer more lenient qualification terms.

What can personal loan funds be used for?

So, what can personal loans actually go toward? We mentioned that personal loans are not usually used to pay for direct college expenses like tuition. This is because many lenders will not allow them to go toward postsecondary education. 

Most students also realize that student loans–whether federal through your Free Application for Federal Student Aid (FAFSA) or private–are likely to have more advantageous terms than personal loans. While personal loans can’t be used for the direct cost of attendance, they can apply toward any of the following purposes and more:

• Medical expenses 
• Living expenses, like rent
• Travel
• Funding for an unpaid internship 
• Groceries
• Parking tickets
• Pet expenses 
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Clearly, personal loans still offer lots of coverage and can help you out with some pesky costs. Keep in mind that some academic-related expenses for undergraduate and graduate students may not be covered by personal loans.

Pros and cons of personal loans for students

Deciding on funding options means juggling lots of new information. Here are some pros and cons of taking out a personal loan as a student: 

• Pros:
• Better interest rate than credit cards 
• Immediate solution to a crisis
• Head start to financial responsibility and building a credit score
• Cons:
• Immediate monthly payments
• Risk losing assets (if you choose a secured loan)
• Accumulating debt
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Sometimes you can't avoid taking on more student loan debt. The key is deciding whether you're capable of paying the total cost of this debt. For student loans, this repayment period is pushed off while you’re in school and starts after you get that post-grad big-kid job. 

For personal loans, there’s no grace period and repayment starts ASAP. The exact repayment amount will vary based on whether you have bad credit or excellent credit, whether you qualify for low-interest rates, existing loan protections, and more. 

Regardless, you will owe payments across the full life of the loan and possibly beyond. Plus, there could be existing prepayment penalties or autopay limitations you’ll need to be aware of. 

Just think about your current income and what you can comfortably handle. You should be stressed about exams and extracurriculars, not loan repayment!

How to find the right personal loan for you

Once you decide you need a personal loan, it's time to start shopping. Remember, all lenders and loan terms are different! When looking for the right personal loan, keep the following in mind:

• What loan amounts does the lender offer, and can you get a fixed interest rate?
• Have you checked for hidden fees and penalties for early loan payments?
• What are the minimum and maximum loan allowances?
• If using a cosigner, does the lender offer an option for cosigner release following an approved period of timely payments?
• Can you afford startup costs like the origination fee? 
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The perfect personal loan for another student may not work for you. Always keep your financial situation and ideal financial future in mind when looking for loans. 

If you need clarification or have questions, consider visiting your school's financial aid office. We know it may be a bit of a hike (who wants to talk to visit the Registrar building in their free time, right?), but they have the information and drive to help you make informed financial decisions. Stop by and see what they can do for you!

Other types of loans for students

Student funding can come from all directions. The key is determining what you really need and what you can qualify for. Here are some other loan options for students:

• Federal student loans – Given by the federal government, these loans have many favorable terms, late repayment options, and even deferment options. 
• Private student loans – Given by lending institutions, these private loans may have less competitive terms, but they have late repayment terms.
• Family loans–You can get a loan directly from family members, which has no official repayment or eligibility requirements and is discussed within family units. 
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Discuss your options with trusted adults or family members, if possible. It helps to write down your needs and keep track of financing. 

Side note: Federal student loans may have loan forgiveness programs for borrowers that private lenders won’t offer. 

Students can get quick cash with Kora

Congratulations, now you know all about student personal loans, including how they work, the pros and cons, and how to find the best one for you! Here at Kora, we put students first and design all our financial solutions for college students' success. 

Many students don't require a huge amount of funding from a personal loan. Maybe there's a rent payment you can't make, or perhaps those parking tickets have started to add up. When your part-time job isn’t enough and you need a bit of funding, Kora Financial is ready to help. 

KoraCash is a personal loan FOR students who need money fast with fair rates on their terms (and it may help build their credit history at the same time). Download the convenient app and apply today for up to $3,000 in funding. No minimum credit score requirement! 

Discover what Kora Financial can do for you!