Should You Take out a Personal Loan to Pay for College?
When it comes to education, you should never pinch pennies or settle for the cheapest universities; however, this also doesn’t mean that you should just go and enroll in the most expensive educational institute you can find. As with any financial decision, you should know what you’re getting into—and how—before you invest your time, money, and effort into your chosen university.
The main problem people face when planning a college education is how to pay for it. In this post, your friends at GoBear will show you how a personal loan can be the key to accomplishing academic success—or not.
Personal loan for college tuition
A personal loan is a viable option if you’re strapped for cash come enrollment time because, unlike credit cards, most personal loans come with lower interest rates and upfront fees. Of course, your capability to pay back the loan will still be a big factor when you apply for one, but compared to a credit card, personal loans are more lenient when it comes to their requirements.
What are the pros of getting a personal loan for your college tuition?
- Most personal loans have lower interest rates compared to credit cards. Shop around and compare personal loans to see which ones have the most competitive interest rates and which ones most suit your needs.
- Personal loans are more flexible when it comes to payment terms. You can request for a lighter payment term according to what you can afford to pay. For example, a loan of ₱100,000 can be paid within 12, 24, or 36 months, depending on your needs.
- Personal loans have fixed monthly repayment amounts that are laid out even before you get the loan. This allows you to plan your budget because the amount you pay every month stays the same throughout the end of the repayment term.
- Personal loans are versatile enough that you can use them to pay for other education essentials, like books and other school supplies, without having to create a separate payment plan.
What’s the catch?
In the Philippines, many turn to personal loans to fund their school tuition due to its accessibility. However, being a common practice doesn’t necessarily mean you should follow suit. Before deciding on whether you should get a personal loan or not, take a look at some of the reasons why you shouldn’t, so you know what you’re getting into.
What are the cons of getting a personal loan for your college tuition?
- Because personal loans aren’t that stringent with their requirements, some providers charge higher interest rates and shorter payment terms.
- While some loan providers allow you to make early repayments, others will penalize you for doing so.
- If you don’t do your homework, you’ll be stuck with a personal loan with high-interest rates and poor payment terms.
- Some personal loan providers don’t allow part payment, requiring you to pay the entire loan period with significant interest.
- Since personal loans are considered high-risk, most personal loans require a guarantor or co-signee.
Is a personal loan the best way to go?
It all boils down to how much you need to borrow and how much interest you’re willing to pay. Take a long hard look at how the long-term costs add up and see if you can afford it. After which, you can go ahead and compare personal loans to see which is the best for your educational needs.