Personal Loans for College Students: The Pros, Cons, and Options

Updated on April 10, 2024

College students are often responsible for paying tuition, rent, transportation, food, and much more. They also have the responsibility of staying on top of their studies, attaining internships, and still finding personal time for themselves.

For a busy student juggling academics, internships, clubs, and a social life, there’s often no time left over to work, and students will find themselves running low on cash with payments coming up they are unable to cover.

Personal loans offer opportunities for students, particularly nonresidents, to stay on top of their payments without worrying about finding time to work. However, are personal loans really the best option?

Are personal loans a good option for students?

Personal loans are great options for the following reasons:

  • Improving your credit score
  • Helping pay for a large upcoming expense
  • Financing living expenses
  • Refinancing high-interest debts
  • Paying for medical expenses

In addition, personal loans typically have fast approval times. Unlike student loans or other types of loans, the application process is much less rigorous with less paperwork needed. This is great for students who need to find money quickly to pay for fast-approaching bills.

International Students

For students living in the US on a student visa, they may quickly feel the expenses of international living piling up. Moving costs, flights, visa fees, increased tuition costs and more can place financial burdens on international students with little options.,

Although not all US lenders allow international students to receive personal loans, there are a few lenders that do offer low-cost loans to international students. One such lender is Stilt, offering low-cost loans to students, even if they have a limited or no credit history in the US.

Students Unable to Cover Expenses Any Other Way

Personal loans are reasonable options for students who have exhausted every other option available to them.

When they run out of financial support from their family, have used up their student loans, and have no time to work to cover expenses, personal loans can be the next option to cover expenses.

Even though a personal loan may be your last resort, that does not mean that they are the worst option available to you. Personal loans can help students bounce back from tough financial times and are often a lifesaver to busy students who are looking for a sensible and practical choice.

Recent Graduates

Recent college graduates who are still on the job search, or just starting their jobs often turn to personal loans to cover expenses.

Although a recent college grad may have secured higher income potential after receiving their degree, they now have to deal with paying back their student loans. These payments can often use up an entire paycheck, leaving no more money to spend on other necessary expenses.

Fortunately, once a former student is fully transitioned into their work and their income increases and debt decreases, they can begin to pay for their expenses on their own.

Until this time comes, personal loans are great options to relieve the stress that comes with transitioning into this new chapter in a young adult’s life.

4 Types of Personal Loans for Students

There are tons of personal loan options out there for students, but finding the best lender is critical in ensuring that you can easily pay off the loan in the future.

The best personal loan options are those with low-interest rates and fees, with great service and easy processing. A good lender will cater to your needs and meet your financial concerns.

Here are some of the most popular personal loan options for students.

Easy, High-Rate Options

Many of the “easiest” options you may first come across end up having the highest interest rates. Although these lenders may seem like the simplest option, in the long run, you will likely find yourselves facing much more stress when the high-interest rates pile up and need to be paid off.

Making sure you get a good interest rate from your lender is easy: read all the terms of the loan!

Before signing off on a personal loan, you should know all of the terms and conditions of the loan. Ask every question you have, as this will prevent surprising payments from popping up in the future.

A good lender will be willing to answer your concerns, and you should stay away from any lender that tries to push you into taking their loan. Often, the easiest option is not the best!


Banks are great options for personal loans – however, they often require borrowers to have existing good credit. Unfortunately, many college students are still building up their credit, and will not qualify for a bank loan due to their low, or limited credit score.

If you do qualify for a bank’s personal loan, you may find some banks offering you extra incentives to choose them for your personal loan. If you already have an account with a bank, they may remove monthly maintenance fees or offer lower interest rates.

You should check with your bank to see what incentives they may offer to existing customers seeking personal loans.

Credit Unions

Unlike a bank, a credit union is a not-for-profit financial organization that only take members that reside, work, or study within a particular area.

A credit union is typically more flexible with its lending criteria than a traditional bank. However, similar to a bank, if you are already a member of a credit union, you may receive additional incentives to take out a personal loan through that credit union.

A possible downside of applying for a loan with a credit union is that many credit unions conduct a hard credit check on applicants. This causes a temporary dip in your credit score.

Most online lenders only perform soft credit checks on applicants to see if they qualify for a loan.

Online Lenders

Online lenders are a great option for personal loans as the application process is typically much faster and simpler than a bank or credit union. When getting a loan from an online lender, the money is deposited directly into your bank account giving you total control on how to spend the loan.

An online lender will probably be your best bet on getting a loan quickly and conveniently, and with tons of online lenders out there, you have many options to choose from to find the lender best for you.

7 Best Personal Loans for Students

1. Stilt

Stilt is an online lender dedicated to helping students and immigrants build a better financial future. With Stilt, there are no prepayment fees so you can pay back your loans as early as you would like, and their interest rates are some of the lowest in the industry.

Unlike most other lenders, Stilt does not require an existing credit history, a cosigner, or a social security number. Instead, they take a holistic approach in determining your interest rate by looking at your education, work experience, income, and financial behavior to give you the lowest rates.

This is great news for international students, or students who supportthemselves financially through college. Despite not requiring a cosigner or credit history, Stilt is still able to offer the lowest interest rates to match, or often even exceed other online lenders.

2. SoFi

SoFi offers one of the largest loan amount options, with up to $100,000 available to take out as a loan. Their easy online application process gives you a fast turnaround time to help you pay off debt or make a major purchase. Rather than just looking at your credit score, they consider factors such as estimated cash flow, career, and education, to get the best rate.

SoFi does require an initial credit score of 680 to apply, but offers great benefits such as helping you find a job or allowing you to temporarily pause payments when financial hardships come up.

3. Upstart

Upstart uses Advanced Intelligence(AI) software to provide loans and improve consumers’ access to credit. Their AI based lending constantly finds new ways to identify qualified borrowers and determine low rates.

In addition, qualifying for an Upstart loan requires a credit score of only 620 which is lower than most under online lenders requiring a score somewhere in the high 600’s. There are no application fees or prepayment penalties as well.

4. Citizens Bank

Citizens Bank has loan options between $5,000 and $50,000 with customized repayment terms and no fees.

You can check your personalized rate from Citizens Bank in under two minutes, and their application process is just as simple. All of the required documents can all be e-signed and uploaded allowing you to get money deposited into your account as soon as possible.

5. Lending Point

LendingPoint was named the Best Personal Loan of 2018 by U.S. News and World Report due to their exceptional customer service, easy application process, and low-cost loans. Based on 852 customer reviews, they have a 9.6 out of 10 rating on Trustpilot showing that the customer experience at Lending Point is one of the best in the market.

Lending Point also offers same-day approvals allowing borrowers to get up to $25,000 as soon as the next business day.

6. Earnest

For students who don’t have a long history of credit or has a series of negative events on their credit report, finding a lender can be extremely difficult. However, getting a low-cost loan can still be an option by going with Earnest, an online lender that takes into account other aspects of your personal finances to get your loan approved.

Earnest looks at your checkings, savings, and investments to determine your loan eligibility and get you an interest rate that won’t be as high as online lenders that only look at your credit score and history.

7. Avant

Avant is a Chicago-based company working on building the quickest way for people to get access to loans.

They are one of the best options for those with a limited credit history as their minimum credit score requirement is just 580 with no minimum credit history required. With Avant, you can choose loans from $2,000 to $35,000 with terms between 2 and 5 years.

As with most other online lenders, Avant has a quick and easy online application process with no fees or prepayment penalties.

Personal Loan vs Student Loan?

You may be debating between taking a personal loan or a student loan. There are many differences that set these loans apart:

  • How you can use your money
  • How you receive your money
  • Types of lenders
  • When to repay your loan

You should be aware of these differences to help make your decision on which type of loan to take out.

How You Can Use Your Money

The biggest difference between a personal loan and a student loan is that student loans will only cover school expenses, and nothing more. Therefore, if your student loan does cover all your student expenses including tuition, books, and fees, you will still need additional money to cover rent or transportation.

These additional payments will not be covered by a student loan and are why personal loans come in handy. Under a personal loan, you have total control overf what to spend it on. This could include school expenses, but it could also include other necessary expenses such as groceries or rent.

How You Receive Your Money

Personal loans are sent directly to you whereas a typical student loan is given to your school’s financial aid office first, and then distributed to you later.

This could be problematic for students who need to pay off expenses now, but won’t receive their student loan until the school distributes it to them. This waiting time could often take months depending on the financial aid processes of the school.

Types of Lenders

Student loans are most often funded by the federal government or private lenders. On the other hand, personal loans are given by banks, credit unions, and online lenders.

The borrowing limit for federal and private loans can sometimes be higher than a bank personal loan, but online lenders often offer large loans to match amounts that federal and private loans may offer.

When to Repay Your Loan

Another major difference between a personal loan and a student loan is when repayments begin.

For most personal loans, repayments start after the first month that the loan is distributed.

However, for most student loans, you don’t begin repaying your loan until a grace period after you graduate. This grace period is usually at least six months but can vary based on the lender. Even though payments start later than a personal loan, there typically are no fees for early repayments.

Problems With Personal Loans for College Students

There are a few things you should keep in mind before you decide to take out a personal loan. Many lenders may try to take advantage of you by giving you high-interest rates or making payments tough.

However, these problems can be easily avoidable if you make sure to closely look over the terms of your loan and take out a loan with a company that you trust.

In addition, a personal loan should be used for essential expenses to help relieve the financial responsibility that comes with being a college student. Using a personal loan to finance vacations, unnecessary purchases, or extravagant gifts will likely only add more stress in the future when it comes to paying these purchases off.

Although you can use your personal loan on whatever purchases you would like, that doesn’t mean that you should spend it on the first thing you see. Being a responsible borrower means borrowing only what you need, practicing good credit behavior, and making payments on time.

This will not only make you a more credible borrower, but it will also pay off in the future when you are repaying your loans. The more responsible you are as a borrower will lessen the stress of paying off your loans.


For a busy college student, difficult financial issues can often arise and personal loans can be the answer. With any type of loan, finding a credible lender with low-interest rates and easy processing is essential.

There are hundreds of lending options out there, and you should research to see which will be the best option for you. Taking out a personal loan is not a hasty choice to make and not taking the time to find the best lender can lead to more problems in the future.

Stilt is just one option that dedicates themselves to catering to the circumstances of students and immigrants. Stilt is perfect for the college student self-financing their college education, or for international students living in the US on a student visa.

Since no cosigner or credit history is needed to qualify for one of Stilt’s low-cost loans, Stilt can be the solution for these types of students needing help with managing their current financial struggles.

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