For many people, a college education is a ticket to achieving financial freedom and success. But nowadays, every student who gets a college degree often ends up burdened with thousands of dollars in student loans. Considering the additional difficulty of getting accepted for a job within your area of study, paying off a student loan can be an impossible task for some.
According to statistics, students who graduated in 2017 had an average debt of $39,400, while the national total student loan debt comes to a staggering $1.48 trillion. If you are part of the statistics, how do you manage to pay off a student loan without hurting your financial history?
What is a personal loan?
Although some may think that using a loan to pay off another may not sound like the best idea, it makes a lot of sense if you consider the benefits of the product as well as its features. A personal loan can come from a bank, non-traditional lender, or a credit union. Loan payment terms usually range between one to five years. Some of the best personal loan lenders cater to borrowers with poor credit rating, and personal loans are also typically unsecured or don’t require collateral.
Using a personal loan to pay off a student loan
Another feature of personal loans is their versatility. You can use a personal loan for many things including loan consolidation or just covering intermediate financial conditions until you can get on your feet and have a secure job. Depending on the personal loan product you apply and qualify for, most personal loans won’t negatively impact your credit score if you decide to pay it off early unlike how a student loan would. But regardless of how attractive a personal loan appears to be, always keep in mind that a personal loan is still debt and must always be applied for with caution. Regarding paying off a student loan using a personal loan, consider it only if getting your student loan paid off is the main priority.
What are the advantages of a personal loan?
Here are the specific circumstances when using a personal loan to pay off a student loan can be a sound financial decision:
- A personal loan could give you access to lower interest rates.
- Personal loans have shorter terms and would benefit you if you intend to pay off your loan as fast as possible.
- A personal loan can help with consolidating multiple student loans and other debt into one payment.
- Student loans usually have co-signers, and if you use a personal loan to pay it off, co-signers on the student loan get released from their obligation.
- If you end up filing for bankruptcy, you can discharge a personal loan, but you can’t discharge a student loan.
In many ways, a personal loan does pose an excellent solution for paying off outstanding student loan debt. Nevertheless, always proceed with caution and always weigh all available options first before applying for another type of financial obligation.