Personal loans for students work the same way as personal loans for full-time employees. The difference is the eligibility criteria, which is usually more flexible. This allows students with lower incomes and fewer assets, or working part-time, to apply. Student loans also come with smaller borrowing amounts, and terms and repayments may be more strict. These personal loans may also have benefits such as discounted interest rates or fee waivers.
While personal loans can be used for any worthwhile purpose, you may want to avoid taking a student loan to cover small, everyday expenses. If you're already struggling to manage your daily expenses, adding loan repayments into your budget may not be the best option.
What is a personal loan?
With a personal loan, you can borrow money to pay for personal expenses. Personal loans are offered by a variety of lenders, including traditional lenders like banks, credit unions and building societies. They are also offered by online lenders. Personal loans come with loan terms, which is the time you have to repay the loan. Interest is usually charged, which is the fee borrowers charge for lending. There may also be additional fees, like establishment fees and monthly account keeping fees.
What type of personal loans can I apply for as a student?
For personal loans for students, there are several options:
- Secured personal loans. This type of personal loan requires attaching an asset, such as a car, as a guarantee for the loan. As a result, these loans generally come with lower interest rates than unsecured loans. The eligibility criteria are also more flexible.
- Unsecured personal loans. With an unsecured loan, you can borrow money without needing an asset as loan security. These loans are more expensive than secured loans. But applications are shorter and approval times are faster.
- Medical student loans. This loan is offered by a few lenders exclusively for medical and dental students. Qualifying students in their final year of study can use the loan funds to pay for their course, living expenses, debt consolidation or other purposes.
- Graduate loans. If you're a final year student at university, you may be eligible for a loan with no repayments for the first year. This loan can be used to finance anything and can help cover expenses while you're looking for a job after uni.
- Car loans. If you're looking to buy a car, students may be eligible for a car loan with a wide range of lenders. This is a secured loan. You will have to use the car as a guarantee on the loan, and receive lower rates and fees in return.
- Interest-free loans. This loan is for low-income earners. It is offered by 170 local community organisations across 600 locations in Australia. You can borrow up to $1,500 to pay for bills and essentials, with terms ranging from 12 to 18 months. As the name implies, no interest is charged. You will only pay for what you borrow.
- Buy now pay later. You can make interest-free purchases and pay in instalments. Many retailers now offer this option, allowing you to break down your repayments into smaller, more manageable chunks. There are also buy now pay later services that let you pay your bills in instalments. Because repayment terms can be short, you should consider interest-free finance for larger purchases.
- 0% interest financing from retailers. Some retailers offer interest-free periods on the sale of their goods and appliances. For instance, The Good Guys offers up to 60 months interest-free on home appliance purchases with a minimum spend in-store or online.
- Payday loans. If you need a quick loan in emergency financial situations, a payday loan is an option. These loans are small and have short repayment terms, but are more expensive than standard payday loans. These loans come with high fees and charges, and are not a long-term financial solution.
What are the pros and cons of personal loans?
- Can help you cover large, out-of-reach expenses, like the purchase of a laptop.
- If you make all your repayments on time, your credit score will improve, making you eligible for further credit in the future.
- Can alleviate financial stress in the short-term.
- You're getting into a long-term debt contract.
- You need some form of regular income to be able to pay for it.
- Having to make regular payments can add to your stress.
- If you don't make repayments on time or default, your credit score will take a hit.
What can I use a personal loan for?
A personal loan can be used for pretty much any legitimate purpose. Common reasons students take out personal loans include:
A laptop is a basic necessity for pretty much every student, but unfortunately they don't come cheap. You can use a small personal loan to buy the laptop you need for your studies, or to upgrade your existing model.
If you're in your last year of university, or you've recently graduated, you may need a personal loan to tide you over until you find a job. Luckily, there are personal loans for unemployed applicants available.
Course books/apprenticeship tools
Aside from just laptops, you may need to purchase various course books or supplies for your uni course. If you're doing an apprenticeship, there may also be tools of your trade that you need to acquire.
Which lenders offer personal loans for students?
We've listed lenders and benefits and discounts for students below:
|Lender||Eligibility criteria||Benefits for students||Review the loan|
|Bank of Melbourne||-||Review|
|People's Choice CU||-||Review|
What should I look for when comparing personal loans?
- Interest rate. This is how much the lender will charge you for the loan. Interest rates can either be fixed or variable. A fixed interest rate stays the same over the loan period. This makes it easier to predict and budget. In contrast, a variable rate of interest can change on a monthly basis depending on the market interest rate. It can be lower in some months and higher in others.
- Comparison rate. The comparison rate is the true cost of the loan. This is displayed as a percentage. It includes both the interest rate and the various fees and charges that come with the loan. The comparison rate is often higher, but never lower than the interest rate. It is how much you will actually pay for the loan.
- Fees. These can include establishment and ongoing fees, and will add to the overall cost of your loan. Some lenders may waive them altogether, but in some cases it may be unavoidable. These fees are generally included in the comparison rate. But some fees, like fees for paying the loan early, may not. It's important to consider all fees before applying.
- Loan terms and repayment. Apart from the cost of the loan, you should also take into consideration the length or term of your loan. This is how long you have to repay the loan. While it may be tempting to opt for a long term, remember that you'll be paying interest and fees during that time. This may drive up the total cost of the loan.
- Loan amounts. Minimum and maximum loan amounts are set by lenders. How much you can borrow will depend on your income and credit score. It's important to check if the amount you need is within the range offered by the lender.
What should I keep in mind when applying for a personal loan?
Apart from considering interest and comparison rates, there are a few other factors to keep in mind when applying for a loan. You should look into the following before applying:
- How much can I afford? While you may need the loan funds, you need to be able to afford the loan. You need to take into consideration how much the loan will cost over its lifetime, and not merely your monthly repayments. Don't forget to include fees as well as interest rates in your calculations.
- Does it fit my budget? After you calculate the cost of the loan, you need to ask yourself if you can afford it. How does it fit in with your current budget? Will making repayments leave you out of pocket? You should only apply for a loan if it fits comfortably within your budget.
- Can I repay the loan within the given loan term? Once you've calculated its cost and affordability, ask yourself if you can repay the loan in the time given to you. If you fail to make your repayments, there may be high fines and even legal repercussions. If you've opted for a secured loan, the lender can also repossess your asset.
- Is the loan competitive? Compare rates and fees to other similar loan products and see how they fare. Are they competitive? You want to select the product that will cost you the least. Sometimes lenders advertise low interest rates, but these loans aren't always the cheapest. That's because they may charge high fees, which may offset any gains from low interest. You should factor all this in your comparison.
- Am I eligible for the loan? This may sound obvious, but if you don't meet the lender's requirements, you're not likely to get the loan. You can talk to the lender before applying to determine if you qualify.
- What is the lender's reputation? This is particularly important with payday loans. You need to check if the lender is registered with ASIC. Look into how easy the lender is to contact. This is important in case there's an emergency and you need to contact them regarding repayments. If possible, you should also read third-party customer reviews of the lender.
- Is the loan I'm applying for suitable for the loan purpose? If you want to purchase a laptop, you need to apply for a loan suitable for the purpose. Applying for a car loan won't be of much help as car loans come with restrictions. While personal loans can be used for a variety of purposes, there may be restrictions that limit how you can use the funds. You should familiarise yourself with the terms of the loan to see if the loan you're applying for is suitable.
What are the risks of applying for a personal loan?
- Long-term repercussions and legal issues. Once you sign a loan agreement, you are bound to its conditions. You will have to pay the loan and all the fees and payments. For short-term loans, you could be charged up to 200% of what you borrowed. For unsecured loans, the lender can initiate legal proceedings against you if you don't repay the loan. For secured loans, your asset can be repossessed by the lender. The lender can also report the debt to a credit reporting body like Equifax and use the services of a debt collector.
- Multiple applications. Every loan application shows up on credit reports. Several applications within a short period can hurt your credit score. This can make it harder for you to get a loan in the future. Find a single loan you're eligible for and only apply for one loan product at a time.
- Getting into debt. Debt comes with responsibilities. If you can't meet your repayments, you should contact the lender as soon as you can. If you fail to do so, you may be charged late or default fees, which will lead to more debt. Your payment history will affect your credit score – for better or worse.
How do I know if I'm eligible for a personal loan?
Checking if you're eligible for a personal loan is relatively simple. Here's what you have to do:
- Check the minimum eligibility criteria. Lenders will have minimum criteria you'll have to meet to qualify for a loan. The criteria will vary from lender to lender, but there are some basic requirements. These involve age, residency, employment and income. Some lenders have more stringent requirements than others. Before submitting an application, you should make sure you meet all the minimum requirements. We've also listed the minimum eligibility criteria for loans on every review page and in the table above.
- Call the lender if you're unsure. Not sure if you meet one of the criteria? Call the lender or jump onto live chat and confirm with them directly before applying. This way you'll know for certain before applying.
- Consider how you can improve your application. There are many ways to improve your application before you apply. For instance, some lenders (such as NAB) note on their site that opening up a transaction account with them can improve your chances. You'll need to do this a few months before applying. This will give you an opportunity to establish a good transaction history with them. If the lender you're applying with doesn't offer transaction account products, you could work on your savings before applying. A good savings record goes a long way. Additionally, paying all your bills on time, including utilities and credit cards, can demonstrate you're a reliable borrower.
Tuition fees and FEE-HELP loans
When you attend university or an approved higher education provider, you can get a FEE-HELP loan to pay all or part of your tuition fees.
These loans do not cover costs like accommodation, laptops or textbooks.
To be eligible for a FEE-HELP loan, you must:
- Be an Australian citizen and study at least part of your course in Australia
- Be a New Zealand Special Category visa (SCV) holder or permanent humanitarian visa holder and meet the residency requirements. Permanent residents can only get FEE-HELP for approved bridging studies.
- Have an available HELP balance
- Be enrolled in a fee-paying place at a provider that offers FEE-HELP loans
- Be enrolled in an eligible course at your provider by the census date (your provider can tell you if your course is eligible)
- Submit the Request for FEE-HELP loan form to your provider by the census date
- Maintain a pass rate of more than 50%
For more information on FEE-HELP and managing student debt in Australia, you can check out our guide to government student assistance.
How can I apply for a personal loan?
👁 Compare lenders. Look at the fees, terms and eligibility criteria, and find a loan that suits you.
🔍 Once you've settled on a lender from the table above, click "Go to site" to visit the lender's website.
✍ You can submit an online application. Keep all the documents required handy. This will speed up the process.
Why compare personal loans with Finder?
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