Personal loans for students

If you're studying, taking a personal bank loan on top of your student loans should not be undertaken lightly, but it may be an option to consider.

Key points

  • Explore your other avenues for financial support before turning to a personal loan
  • At all costs avoid payday loans and other forms of high-interest, short-term borrowing
  • If you have to take a loan, look for the lowest interest rate and use a soft search to avoid damaging your credit rating
  • Finding business loans for students will be a challenge, but there are options to explore

Generally banks are reluctant to lend to students, as they're unlikely to be employed and may struggle to make repayments.

There are loan products available, but this type of product does have its disadvantages.

If you're struggling with money...

Before thinking about taking a loan, make sure you've considered all the other options to avoid more debt.

That may start with family and friends or taking on additional paid work, but you should also speak to your college or university - they may be able to help with bursaries, scholarships, awards and/or hardship funds.

Your student bank account may offer favourable overdraft terms and student credit cards could be worth considering, but in both instances remember the dangers of taking on additional debt.

Make sure you've checked the benefits you're entitled to from the government, and think about whether a credit union, or a budgeting loan from the social fund could help.

There's also the possibility of assistance from your local authority, and you can contact your local Citizens Advice Bureau, National Debtline or StepChange Debt Charity (formerly the Consumer Credit Counselling Service) for free advice.

What can I use a personal student loan for?

Although your student loan will help pay for the day-to-day outgoings that come with being at university, if you need to make a one-off large payment - for example buying a car or course books - a personal loan could help to spread the cost.Loans: A wad of notes

Financial institutions prepared to offer such deals to students are few and far between, though, and - given the risk to the lender - interest rates may not be favourable.

"A personal loan is a product which shouldn't be taken out lightly," warns's Matt Sanders.

"If you aren't able to make your repayments you could find yourself in real financial trouble."

Differences from government-backed student loans

There are two types of government-backed student loan which will specifically help to fund your studying - one is intended for tuition and the other for maintenance.


  • Interest rates charged by payday lenders are likely to be extortionate and can lead to crippling debt

You'll only need to begin repaying these loans when you start earning over a certain threshold - for more information visit the Student Loans Company, or take a look at our student finance guide.

A personal loan taken out from a bank or another financial institution is more flexible in what you can use it for - it can be used to fund whatever you wish, but you'll have to make repayments monthly from the date that you take it out.

If, like many students, you're considering a personal loan for the first time, do a bit of research before committing by reading our beginners' guide to loans, and also find out a bit more about credit ratings.

What to look for in personal loans for students

If you've decided that a personal loan is the right option for you and you can afford to make the monthly repayments without issue, make sure you consider all the terms and rates to find the right product to suit your needs.Cutting the cost of loans

Look at the APR, the total amount payable and the monthly repayments, and use a smart search tool to find the loans you're likely to qualify for before you go ahead with an application (you can read more about smart searches below).

Whatever you do, try not to borrow past your needs because you'll just have to pay more interest over a longer period of time.

Also, you'll have to stick to your repayment plan if you want to avoid charges which can push you into more debt, especially if you're already on a strict budget.

Avoid payday loans

There are specific payday lenders who target students with short-term loans as a way of making ends meet between student loan payments.

However, the interest rate on these types of products is likely to be astronomical and you could end up falling into a huge amount of debt.

Plus, if you're not able to make your payments on time, you'll fall even further into debt and may really struggle to pay back the growing debt.

Guarantor loans for students

It's a good idea to space out any applications for loan products because, if you're rejected, it'll negatively affect your rating and could prevent your next application from being approved
Matt Sanders,

A guarantor loan is when someone who isn't named on the loan (often a family member) confirms that they'll be liable to pay for the outstanding money on the loan you've taken out if you don't make your repayments.

It can be useful for those with little or no credit history, but the interest rates tend to be higher than other forms of credit.

It isn't a responsibility to take on lightly for either the student or guarantor.

If you're unable to pay back what you owe, the lender can take both you and the guarantor to court.

Credit checks

If you decide to apply for a loan, you'll have to undergo a credit check to verify whether you're a good candidate for this type of product.

Unfortunately, if you're rejected for a loan this could negatively affect the way firms assess your credit rating, making other applications in the near future more likely to be rejected too.

However, if you choose to compare loans through you'll be able to take advantage of our smart search tool.

By conducting a so-called soft search you're able to see the products you're likely to be accepted for before you apply, limiting the risk of harming your credit history.How to improve a credit score

How to improve your credit rating

"If you haven't previously taken out any loan products, for example a credit card, you may not have an existing credit history," said Sanders.

"However, it's possible to improve your credit score by getting your name on the electoral roll, which will confirm your name against a fixed address.

"Also, it's a good idea to space out any applications for loan products because, if you're rejected, it'll negatively affect your rating and could prevent your next application from being approved."

For more information, read our article on how to improve a credit score.

Career development loans

If you've got your heart set on taking your studies one step further with a postgraduate degree, it may be worth looking into a career development loan.

This can be used to pay for any living expenses you have during your course.

The government will pay the interest on the loan while you're completing your course and repayments are deferred at this time. However, you'll have to begin paying off the debt plus interest within a month of the course ending.

It's important that you're committed to completing the course because, even if you don't finish it, you'll need to repay the loan in full.

Note that there are certain restrictions on the type of course this loan can be taken out for and your studies can't last longer than two years.

Funding a business idea as a student

Obtaining a business loan can be a challenge for anyone, but students face particular challenges.

As just one example, the Prince's Trust can help with funding for those under 30 who have a great business idea... but it's not an option if you're in full-time education, if you're a gap-year student, if you have a postgraduate degree, or if you graduated in the last six months.

You may also want to look at Start-Up Loans, which is a government-funded scheme to provide advice, loans and mentoring to start-ups.

Another avenue to explore is peer-to-peer lending; the most attractive deals are likely to require a good credit history, but if you have a great business idea crowdfunding could be a way to get it off the ground.

Remember, even if you're borrowing to back a business idea, you'll still be personally liable for repaying a loan.

By Abbie Laughton-Coles