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Can a Student Take Out a Personal Loan?


College is expensive, and sometimes student loans and financial aid aren’t enough to cover everything — even after you’ve paid for tuition and housing.

Where can a student turn if they’re strapped for cash?

One option is borrowing money. Students can take out a personal loan to supplement their finances. But is this the best option?

Read on to find out how to take out a personal loan, the pros and cons of this choice, and what other options are out there. 

Can a Student Get a Personal Loan?

Yes, students can borrow personal loans. Life doesn’t stop just because you’re in college — you might take out a personal loan to cover any number of life emergencies or necessities (like a used car to get you to class). You might also use a personal loan to supplement your financial aid package, especially if your line of study does not allow you to hold a job while in school.


Ten common questions about personal loans answered.

Taking out a personal loan is the same whether you’re a student or not. You’ll go through an application process where a lender evaluates your financial situation and determines whether you qualify for a personal loan. While each lender sets their own standards for qualifying, most will look at your:

  • Credit score
  • Credit history
  • Verifiable income
  • Debt-to-income ratio 
Life doesn’t stop just because you’re in college — you might take out a personal loan to cover any number of life emergencies or necessities.

If you’re looking to finance tuition, know that student loans carry advantages personal loans don’t, such as lower interest rates and flexible repayment plans — which can go far when the amount of the loan goes over $10,000.

However, if you’re looking to finance extras like books, school supplies, clothes, and food, personal loans can be much more flexible. Whereas the Office of Federal Student Aid outlines how student loans can be used, personal loans can be used for almost anything

Even if you don’t meet the requirements at first, you can take steps to increase your chances of qualifying for a personal loan.

Qualifying for a personal loan is also easier than qualifying for many other types of credit, but it can be challenging for students who are just starting out. Here are the most common obstacles:

  • Low credit scores. Many lenders expect a credit score of 580 or better, but younger students often have lower scores.
  • Little credit history. Some college students may have no credit history while others may have very little.
  • Debt-to-income ratio. Lenders look for debt-to-income ratios of 30% or less. Students often carry large debts in the form of student loans while only working part-time (or they work jobs with lower salaries).
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Learn how to review your credit score and more.

8 Tips to Qualify for a Personal Loan as a Student

Don’t give up! Even if you don’t meet the requirements at first, you can take steps to increase your chances of qualifying for a personal loan if you’re a student:

  1. Review your credit report. It’s important to know your credit score because that will determine your approval rate. You can check your score for free and should review and correct errors on your credit report before applying for a loan. Remember that student loans affect your credit report even if you don’t have credit cards, auto loans, or other common entries on credit histories.
  2. Improve your credit. You can build credit without going into debt. In fact, you can build credit without a credit card by reporting everyday expenses to the credit bureau and using free online tools.
  3. Use pre-qualification and pre-approval. Don’t apply for personal loans with multiple lenders at once because applying for a loan will temporarily lower you credit. Instead, take advantage of pre-approval tools and only apply for loans you’re likely to get.
  4. Shop around. Every lender sets their own approval terms, so you could be denied by one lender but approved by another. Investigate multiple lenders to determine if you can qualify and what kind of terms are available for you.
  5. Choose a secured loan. The main difference between secured and unsecured loans is that secured loans are backed by collateral. Personal loans are usually unsecured, but offering collateral makes you less risky to the lender and might help get you approved.
  6. Find a cosigner. A good cosigner should have a higher credit score, longer credit history, and/or higher income than yours, such as a parent or grandparent.
  7. Take control of your debt. Outstanding balances on credit cards, auto loans, or other sources of credit can hurt your application. Make sure you’re in good standing with anyone you owe money.
  8. Ask for a reasonable amount. The more you borrow, the higher your monthly payments will be. A lender might be concerned if you ask for a large loan that could be hard for you to pay back, especially if you’re on a tight budget like most students.

Being Smart About Personal Loans

Taking on debt is always a big deal, but it doesn’t have to be a bad thing. In fact, being smart about debt can help you improve your credit and manage your money better.

How can you be smart about personal loans?

  1. Make sure you understand personal loans — the types available, what repayment is like, and how carrying that debt can affect your financial future. There’s a lot you need to know before taking out a personal loan, like the potential fees involved and how to read a personal loan agreement so you understand the terms governing your loan.
  2. Most importantly, choose a good lender. Don’t jump at the very first offer you get because there may be a better one coming. Read reviews of lenders, compare traditional and online lenders, and only borrow from a credible financial institution.
Being smart about debt can help you improve your credit and manage your money better.

Personal Loan Alternatives for Students

Personal loans do have drawbacks and may not always be the right option for everyone. Here are a few personal loan alternatives for students:

  • Scholarships and Grants. Scholarships and grants are fantastic ways to cover college expenses because they don’t need to be repaid. Some scholarships and grants have rules for how they can be used (for example, some might only cover tuition), but others are more flexible and can be used for things like housing, food, and everyday expenses.
  • Work-Study. The Federal Work-Study program offers part-time jobs for undergraduate and graduate students who can demonstrate financial need. These jobs allow students to work in their academic field while they attend school.
  • Private Student Loans. Private student loans are provided by private organizations like banks and online lenders instead of by the federal government. While their interest rates and repayment terms are not as generous as federal student loans, private loans are a great option for those who don’t qualify for federal loans.
  • Credit Cards. Interest rates are usually higher on credit cards, but you won’t need a great credit score to get one. They’re accepted anywhere and you can use them over and over. However, they do require careful debt management because interest and fees can add up quickly.
  • Personal Line of Credit. A personal line of credit is similar to a credit card. A lender approves you to borrow up to a certain amount of money during a certain time frame. You can borrow whatever you need up to that amount until your time frame closes. Then you start a period of repayment.
  • HELOC. If you happen to own a home (maybe you’re going back to school), a home equity line of credit allows you to borrow money using your home as collateral. Because the loan is secured, interest is usually lower and there are fewer fees.

Learn all about personal lines of credit with our guide.

The Takeaway

Borrowing money can be scary, especially when you’re just starting out and already juggling debt.

But smart students who take the time to research their options can leverage this early debt to build their credit, their confidence, and their post-college future. Personal loans may be one part of that process for you.

Learn More About Personal Loans from PenFed 

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