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Can College Students Take Out Personal Loans?

Jan 12, 2014

Yes, it is possible for college students to take out personal loans but they must have a means of comfortably repaying them and adequate proof of this. Many part time jobs that college students commonly work at whilst at college are cash in hand jobs, they’re unreported – there might not even be a need to pay tax due to tax free thresholds and other considerations – and their earnings often aren’t deposited in bank accounts. This is, for many college students, what prevents them from successfully applying for small personal loans, but there are a few ways to deal with this.

File a tax return


No one wants to pay tax, however, if you want to boost your chances of successfully applying for a personal loan you might find you need to file a tax return to have some proof of your earnings on hand when applying. Take a look at what the tax free threshold is for the amount of money you earn – if you’re working part time there’s a good chance that you won’t need to pay any tax on your earnings anyway and you’ll have some evidence of your earnings to show when applying for a personal loan.

Bank your earnings


An excellent way to prove how much money you have coming in is to bank your earnings if you get paid in cash. By banking what you get paid in cash you’ll have solid evidence of your earnings and this will prove extremely beneficial when applying for a personal loan now, and later in life when you look at applying for large loans like mortgages. What’s more, banking your earnings is also much safer than stashing your savings under the mattress or in a cookie jar.

Look for alternatives


There are a few alternatives to personal and student loans, like grants and scholarships for example. Whilst scholarships you’ll need to arrange prior to starting college – you should start applying before you complete your senior year – there are always grants to apply for and successfully applying for a grant could help you to avoid having to borrow whilst at college.

Take a look at websites like collegescholarship.org, fastweb.com and studentscholarshipsearch.com, you might find you have some excellent options that could see you getting a slice of that ‘free money’ which, according to Sallie Mae’s ‘How America Pays for College’ 2013 report, pays for 30 percent of US college costs.

Online loans


Many students have found success applying for online personal loans because the application process is often less stringent than that of banks. What’s more, most ‘online lenders’ also make available bad credit loans so they place less emphasis on possessing an excellent credit rating, which as a young person in college, it’s unlikely that you have.

There are a few things to take note of when applying for loans of this nature, most notably the interest rate applied to the loan, the Annual Percentage Rate. You don’t need to be earning a degree in algebra or mathematics to understand that the higher the APR is the more you’ll have to repay, so look around for an online lender that offers competitive interest rates, and make sure you understand the fee and charge structure as well, this is very important to take note of.

There’s often much to take into account when applying for personal loans and finance as a college student, however, provided that you’re able to prove your earnings and show that you can repay what you borrow – think about filing tax returns and banking your savings – you shouldn’t experience any problems borrowing whilst at college.

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