Is a student loan a personal loan?
A student loan is not the same as a personal loan. Student loans are provided by the Government specifically for tuition fees and living costs.
There are two types of student loans: Maintenance loans are usually paid into your bank account spread over the year. Whereas tuition fee loans go directly to the university or college. Repayments for both loans will be automatically deducted from your wages once you reach a certain income threshold after graduation.
Personal loans, on the other hand, are fixed lump sums paid into your bank account by lenders like banks and building societies. They can be used for any purpose (as long as it’s not gambling or anything illegal), and must be repaid on time so as not to affect your credit score. Repayment cannot be deferred until after graduation.
Further differences between these loans are shown below:
Undergraduate student loan:
- Must be a first-time student to be eligible
- The amount you get depends on your individual circumstances and household income (your parents’ or partner’s income on top of your own)
- No fixed monthly repayment schedule - it can increase and decrease with your future wage
- Low interest rates which rise in line with inflation
- Does not appear on your credit report
- No early repayment charges
Check if you are eligible here.
- Don’t need to be a first-time student to be eligible - anyone over the age of 18 can apply
- The amount you can borrow is flexible and depends on the lender’s criteria and your individual circumstances
- A fixed monthly repayment schedule which can help you to budget
- Higher interest rates
- Will show on your credit report. If you maintain your repayments you can boost your credit score, but any missed payments can reduce it
- Early repayment charges may apply, depending on the terms and conditions of your contract
What students might need a personal loan for:
- A car
- Course fees
- Other personal expenses and general living costs
Can I get a personal loan at 17?
No. In the UK, you cannot take out any form of credit from the bank or other financial institution until you turn 18 years old. This includes personal loans, credit cards and overdrafts.
Can a college student get a personal loan?
This depends on the student’s age. A college student will only be able to get a personal loan in the UK if they are 18 years old or over.
What credit score do I need?
Each lender uses their own criteria when it comes to assessing credit applications. There are some lenders out there, who specialise in lending to people with poor credit. But generally the higher your credit score, the better your chances of getting accepted on good terms with low-interest rates.
You can check your credit score for free with our partner, CredAbility. Bear in mind that each agency uses different scoring methods, so your credit score will vary depending on which one you use.
Lenders want to see evidence that you’ve been paying your bills on time. So if you have a good credit history this will work in your favour.
Check out our ultimate guide to improve your credit score for tips on how to make yourself more attractive to lenders.
What other loans can I get as a student?
If you’re not able to get a personal loan, there are alternative loans you could look into as a student. For example, first-time students can apply for an Undergraduate Student Loan, as detailed above. Check your eligibility here.
If you’re looking to do a Masters you can apply for a Postgraduate Master’s Loan from the Government to help towards course fees and living costs. This loan is income-based and you receive payments in three instalments per year. Check if you’re eligible here.
If you go on to study a postgraduate doctoral course like a PhD, you can apply for a Postgraduate Doctoral Loan. The amount you get is not based on your family’s income. But your eligibility does depend on other factors, like your course, your age and your nationality or residency status. You can check your eligibility here.
All of the above student loans become payable once you earn more than a certain threshold, after graduation. Repayments will automatically be deducted from your wages in line with how much you earn after you finish your course.
You may already have a student loan, but find that you need extra funds for things like course books or personal expenses. If you are finding it difficult to get a personal loan from the bank (due to low income or a thin credit history for example), you could consider a guarantor loan instead.
Guarantor loans are designed for people with poor credit. They work just like personal loans, in that you will receive a lump sum upfront and repay it in fixed monthly amounts. The main difference being guarantor loans require a third party to enter the contract to ‘guarantee’ payment - in the event that you can’t afford to pay.
Anyone can be a guarantor, although it’s advisable to choose someone you trust like a close friend or family member. Acceptance is not guaranteed and each lender will use their own criteria to assess your application. Your guarantor will need to have a good credit score.
Both you and your guarantor need to consider the risk involved before entering such an agreement, as you will both be liable to pay. Also, guarantor loans often come with higher interest rates than mainstream loans, to offset some of the risk the lender is taking by giving credit to someone with a poor credit history. Make sure the APR (total cost of borrowing) is affordable before you sign anything.
Things to consider before taking out a personal loan
- How much do you need to borrow? The amount you can borrow may be limited if you have a ‘thin’ credit file or a poor credit history
- What can you afford to pay each month? Don’t overstretch yourself. Remember if you miss a payment it can affect your credit score and your ability to get credit in the future
- What is the cost of borrowing? Compare interest rates and APR to find the cheapest loan
- How long is the agreement for? Make sure you can afford to repay the loan for the full duration of the agreement
- Are you likely to be accepted? Use eligibility checkers to see if you’ll be accepted before you apply, without affecting your credit score. You can use a few different price comparison websites and check with us here
- Have you made any other credit applications recently? Try and space out credit applications to minimise the impact on your credit score
What to do if you are struggling
If you are struggling with debt and you’re finding it hard to get accepted for a personal loan, there are things you can do to help:
- Speak to your university or college - they should have a designated Student Welfare department that can advise you. They can help you apply for hardship funds and check if you’re eligible for a grant
- Get free debt advice from Citizen’s Advice or StepChange
- Avoid taking on more debt
- Find alternative sources of income, through work or family for example
How to apply
- Before you apply for a personal loan, calculate how much you need to borrow, for how long, and how much you can afford to pay back each month
- Check your credit report for free. Rectify any mistakes, as they may be harming your score and reducing your chances of being accepted or getting a good deal
- Shop around and check your eligibility before you apply. You can do this using eligibility checkers which don’t affect your credit score.
- Once you’ve found the best deal you can afford and are likely to get, follow the full application process with that lender
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Intelligent Lending Ltd is a credit broker working with a panel of lenders.