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How to get personal loans For students

Are you a student looking to apply for personal study loans? Read on to find out more.

15 February 2023Stephen Smyth 7 min read
Juggling studies and paying for your college education is easier said than done. While an education loan can help get your tuition fees covered, student loans don’t always cover the entirety of the fee. Moreover, there are so many other expenses students need to take care of.   But there is no need to get disheartened --  if you are a cash-strapped student, applying for a personal loan is exactly what you need.   Here’s everything you need to know about applying for personal study loans in Australia.

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Juggling studies and paying for your college education is easier said than done. While an education loan can help get your tuition fees covered, student loans don’t always cover the entirety of the fee. Moreover, there are so many other expenses students need to take care of.

But there is no need to get disheartened -- if you are a cash-strapped student, applying for a personal loan is exactly what you need.

Here’s everything you need to know about applying for personal study loans in Australia.

Student loans are a form of personal loan specifically meant for students to pay for their college or university education.

Like a regular loan, students can borrow a fixed amount of money and use it for pre-approved expenses. The loan amount must be repaid to the lender along with interest over a pre-determined period. Lenders in Australia also offer such personal loans for international students though there are strict requirements about the kind of visa the student must hold.

In addition to private lenders, the government also provides student loans to Australian residents.

Personal loan for students refer to financial assistance students can avail to pay for expenses related to their studies, including daily expenses incurred. It is an all-purpose loan where the proceeds can be used to pay for tuition fees and living expenses. Typically, student loans are borrowed to pay for professional degrees in colleges or universities as the cost of such courses is significantly higher.

Such loans are not just available for those studying at university but also for those undertaking vocational training.

Personal loans for students are distinct from educational loans. Unlike a personal loan, educational loans cannot be used to pay for any expense apart from the tuition fee. But unlike educational loans, there is no moratorium on the repayment of personal loans. Repayment of the personal loan begins as soon as the funds are provided.

There are a variety of expenses that you can meet using the proceeds of student loans. However, keep in mind that the lender may impose specific restrictions on the utilisation of personal student loans. So make sure to read through the terms and conditions carefully.

Below is a quick overview of typical end uses:

Tuition fees

If you are not eligible to apply for any government assistance, you can apply for personal loans for students and use the proceeds to pay the tuition fees of your course.

Course books, equipment and software

Any student at an Australian university spends a large amount of money purchasing course textbooks, electronic devices such as laptops and tablets, and specialised software licenses such as Adobe Photoshop.

Paying out of pocket for such recurring expenses can be an uphill task. Availing of education loans in Australia can help students meet the costs without paying out of pocket.

Living expenses

For most courses, you either need to stay on the university campus or look for accommodation off-campus.

Getting a personal loan for students can help you cover the living expenses.

Like any financial product, student loans in Australia also have strict eligibility criteria.

While credit providers have their own set of conditions you must fulfil to apply for a loan, here’s what most private lenders require:

  • The loan applicant should be at least 18 years and above
  • Should be an Australian citizen or a permanent resident
  • Must be employed on a full-time or part-time basis
  • Should have a good credit score. If the primary applicant doesn’t have a credit history, the credit score of the co-applicants, such as parents, would be considered.

And can international students get personal loans in Australia? Some lenders may provide personal loans to international students, provided they hold valid visas. Confirm the eligibility requirements of the shortlisted lenders before you send in your application.

Financial assistance provided by the federal government also has eligibility conditions such as residency status and income level of the household. However, there is usually no minimum credit score prescribed.

Here’s what you should consider when comparing loans for students in Australia:

Interest rate

Like all loans, the interest charged on loans for students is one of the first features to consider when comparing your options. The interest rate decides how much it will cost you to borrow.

It is better to go for a fixed-rate loan if you want to ensure that you can repay the loan on time. Variable interest rate loans are better for those who desire more flexibility in loan repayments and want market forces to determine how much they need to pay monthly toward repaying the loan.

Manner of funding

Some lenders may fund study loans in Australia in tranches. In other words, they may release a portion of the funds throughout the life of your course. Other lenders may provide a lump sum amount.

Which is a better option for you depends on the educational institution's requirements -- do they want you to pay the total fees at once or over a period of time.

Repayment tenure

Usually, borrowers have the flexibility to decide the repayment schedule for personal loans for students in Australia. You can opt for fortnightly or monthly repayments, depending on your budget.

Term of your loan

The loan term decides how much time you have to repay the loan. Typically, it is between two to five years. A longer-term provides more flexibility for repayment even though you may end up paying a higher interest. A shorter term means bigger instalments but helps you save on total interest.

The term becomes even more crucial for loans for international students in Australia as it dictates how much time one has to secure employment in Australia to pay off the loan. Choose the term based on your financial situation.

Need for collateral

Typically, student loans are unsecured. You don’t have to offer any valuable asset to borrow the loan. However, lenders usually charge higher interest on unsecured loans to cover the lending risk.

In such cases, a secured loan where you can offer assets, such as a car or equity in a home, can lower the interest rate and make it more affordable to borrow. If you cannot afford the interest charged, check if you can borrow a secured loan.

A bad credit score doesn’t automatically disqualify you from applying for student loans in Australia.

In most cases, any financial assistance the federal government provides doesn't involve any credit score assessment. If you fulfil the other eligibility conditions, applying for government-sponsored loans is your best bet when you have bad credit.

Most private lenders evaluate your creditworthiness before approving your loan application. You may be charged a higher interest rate if you have bad credit. Consider approaching lenders who offer specialised credit products such as student loans for bad credit.

When you have a bad credit score, you must prepare strategically before sending off your applications. Check your credit score and make a list of options available. Speak to the lender before you formally apply -- lenders perform a credit pull to evaluate your loan application, which can lower your score further.

You can get your credit score for free by signing up with ClearScore.

Here’s a look at various student personal loans in Australia provided by the government:

Student loans for university

You can apply for a HECS-HELP loan from the Australian government in case you are approved for a Commonwealth-supported place (CSP) at your university. Such loans for students help to pay tuition fees upfront.

A HECS-HELP loan is one of the interest-free student loans in Australia.

Student loans for TAFE or VET

If you enrol in vocational education and training (VET) or technical and further education courses (TAFE), you can apply for financial assistance from the government. Loans are provided for diplomas, advanced diplomas, graduate certificates, or graduate diploma degrees. The amount you are eligible to borrow is determined by the government and repaid through the Australian tax system once you cross the minimum income threshold.

Centrelink payments

Centrelink is a government agency responsible for providing social security support to Australian citizens. Eligible candidates can also apply for loans for students on Centrelink benefits. Centerlink offers various forms of financial assistance to cover the cost of living, such as through Youth Allowance, Rent Assist, Abstudy, or Austudy.

Usually, being an Australian citizen or a permanent resident is mandatory for obtaining financial assistance from the government.

For private lenders, residency is not necessary as they offer personal loans for international students in Australia, provided their visas are in order.

And Australian residents who cannot qualify for government assistance can also approach private lenders to borrow personal loans for education.

When it comes to providing loans for students, most lenders do not have an upper age limit. Applicants should be at least 18 years old to be eligible for any credit product, including a student loan.

However, the age limit may be an eligibility parameter for certain educational loans. It is best to check with your lender before you begin the application process.

Here’s what you should consider before you apply for a loan for studies:

Pros

  • Availing of student personal loans help you to fund education costs and build a bright future, especially when you don’t have other financial resources
  • The interest rate of such loans is lower compared to other financial products.
  • Taking out a loan allows you to focus on your studies without worrying about how to pay for the course or living expenses.

Cons

  • Repaying a student personal loan may become too costly if you cannot secure employment after completing your studies.
  • If the credit profile of the primary applicant or the co-applicant of the loan is not strong enough, you may be charged a higher-than-usual interest rate.
  • Deferring repayment instalments can push you into a debt trap, and you may end up paying more interest over the life of your loan.

Now that you know how student loans work in Australia, make sure to explore this option if you need more funds to pursue a college degree. Finding the right loan product suited to your needs may seem overwhelming, but it is possible.


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Written by Stephen Smyth

Head of International Expansion

Stephen Smyth has worked in financial services since 1999, specialising in consumer credit. He has worked in banks and consumer credit companies in the United Kingdom, France, Spain, India, South African and has lived in Australia since 2013. He believes that people around the world can benefit from services liked ClearScore to make finances clearer, easier to understand and to find better deals to save money.