How to Use Personal Loans to Your Advantage as a Student
Loan (Photo credit: Philip Taylor PT)
Students often experience a gap between the amount of financial aid that they receive and the amount that they need to make it through the school year. Short-term personal loans help provide the solution for students with needs that are not covered by grants or scholarships. These short-term loans can provide students with the funds that they need and can be paid off before the student graduates.
Housing
Many colleges and universities provide housing for students. However, there are several considerations about college housing. Often, the cost of a semester of housing is more than the amount of rent a student would pay by renting his own apartment. He may be paying a significantly higher price to live on campus than to live nearby in an apartment, especially if the student has roommates. However, many colleges and universities do not provide students with any remaining loan funds until the semester is well underway. A short term loan allows a student to secure more affordable housing. If he has an overage of financial aid, he can pay off the personal loan a couple of months later with these funds.
Textbooks
Textbooks for college students can quickly equal $500 to $1,000 per semester. Many students make the mistake of using student loans to pay for books. Even if they have a low interest rate, many students take thirty years to pay off student loan debt, so the cost of textbooks is paid over multiple times. By using a short term loan for textbooks, students can get the books and supplies that they need with a much shorter repayment window.
Alternatives to Credit Cards
Many forms of credit are available to college students, who are a constant target for credit card offers and more student loans than they really need. Short term personal loans provide more specific terms than other forms of credit. For example, a short term loan often has a fixed interest rate and is often for a few thousand dollars or less. The repayment period is also much shorter. These more specific and fixed terms make it much more likely that students will have the amount borrowed repaid before they graduate. They can also prevent students from getting into more debt. Credit cards are all too convenient and a person can quickly become buried in debt after a few swipes. Interest rates may be near 30%. Individuals who only pay the minimum payment can be paying off debt that they accumulated in college for the next 20 years. Bankrate.com features a variety of calculators that can demonstrate how many years and how much interest will be paid on a personal loan vs. a credit card.
Alternative to Student Loans
In a similar manner, student loans may make a student susceptible to taking on too much debt. Students may receive checks in excess of $10,000 to pay for costs in addition to tuition. However, many students do not need this large an amount, but find it difficult to turn down when the money is readily available. Personal loans ensure that students borrow just what they need.
Short-term personal loans are an affordable option. They provide students with the funds they need without the drawbacks of other forms of credit.
Written by Peter Coppola, a personal finance and insurance researcher. He enjoys writing for various personal finance blogs. Visit EasyFinance.com to learn more about short term finance options.
Category: Short Term Loan
