Monday, October 22, 2018

What Are the Differences Between a Student Loan and a Personal Loan?

What Are the Differences Between a Student Loan and a Personal Loan?


Loans can be complicated. And the more informed you are the better decisions you’ll make about borrowing and your finances. For some people a student loan is the best option for funding school, but for others a personal loan just makes more sense. To make the best choice for your education and your future, first learn a little bit about what makes these two loans different.

A Student Loan Can Be Private or Federal


While all personal loans are managed through private businesses, student loans can be either private or through the federal government. This means that if you choose to go with a student loan to cover your tuition costs you have another important decision to make: private or federal student loans, or both. There are also different types of federal student loans.

A Personal Loan May Not Require a Credit Check


If you have poor credit but still need to finance your education you may think you’ll struggle to get a personal loan. If this is your only reason for choosing a federal student loan over a personal loan, you can reconsider that option. Many lending services, especially those that operate online offer loans that don’t require a credit check. If you’re working your way through school, simply having a job and an income is likely enough to get you approved for one of these loans.

With a Personal Loan You Can Use the Cash for Anything


Both types of loan will give you a lump sum of cash, but there are restrictions on how you can use a student loan. You can only use it for the intended purpose as outlined in the terms. This is usually restricted to things like tuition, school fees, and books. With a personal loan you have no restrictions. So if it would really help you to use some of that money to cover the month’s rent or a car payment, you’re free to do that.

Bankruptcy Won’t Apply to Student Loans


While you hope you will never face this situation in the future, it is important to be aware of how student loans are managed during bankruptcy proceedings. Private and personal loans can be discharged in bankruptcy, which takes the pressure off when you’re in a tight financial situation. Student loans are not so easy to get rid of, and you may have to prove you are completely destitute with no other options in order to discharge them.

Personal Loans Provide Quick Cash


If you’re in a situation in which you need the money quickly, for instance if tuition is due in two days and you don’t have enough to cover it, a personal loan will be faster. A student loan takes a long time to process. But with a personal loan, especially one online, you can get the cash the next day. This helps when you need to cover costs right away.

Knowing more about loans, and the differences between personal and student loans, you can make the best choice for your future.