Can I get a personal loan if I’m a student?
Students can access personal loans from various online lenders, banks, and credit unions. To qualify, you generally need to be over 18, a citizen or permanent resident of Australia, and have stable casual or part-time work. Checking your credit score is crucial, and having a guarantor with good financial standing can enhance approval chances and potentially secure a larger loan amount and lower interest rate.
There’s no doubt about it. Juggling studies, work and the responsibilities of life can be tough. For many students who can’t afford to purchase something they need to move forward up front, a personal loan is a great solution.
The good news is that online lenders, banks and credit unions all have loans available to students.
Tick the box
To qualify for a student personal loan, you must meet the following requirements:
- Age: You need to be over 18 to apply for a student personal loan. Some lenders will limit your loan amount if you are aged between 18 – 21 but this depends on your income and credit score.
- Residency: Most lenders will only offer personal loans to student applicants that are citizens of Australia or Permanent Residents. However, some lenders will accept temporary visa holders.
- Income: As a student, you don’t need to have a very high income to qualify for a personal loan. But you’ll need to show that you have stable casual or part-time work bringing in a regular income. Keep in mind, many lenders do not accept Newstart, Austudy or Youth Allowance as sources of income.
Before you start
Take the time to work out how much you can afford to pay each month on top of your current expenses. You can crunch the numbers on this useful calculator on the MoneySmart website. Once you have a particular personal loan in mind, make sure you’re aware of all the loan features and hidden costs including:
- The loan amount
- The interest rate
- The repayment period
- Additional fees such as establishment, upfront late payment, account keeping, early exit and monthly administration fees
Know the score
When you apply for a personal loan, you can expect the lender to check your credit history, current debt and income so they feel confident you can repay the loan.
Your credit score is a number that sums up the information on your credit report. It takes into account information like the number of credit applications you’ve made and the amount of money you’ve borrowed. It also notes your history of repaying debts on time. Basically, it tells the lender whether or not you are a trustworthy borrower.
If you have a low credit score, you could be stung with higher interest rates so it may be worth working on improving your score before you buy. You can do this by:
- Paying your rent, mortgage and utility bills on time
- Making credit card repayments on time and paying more than the minimum repayment
- Lowering your credit card limit
- Limiting how many applications you make for credit
All of these things will help your credit score to improve over time, giving you a greater chance of being approved for a car loan and securing a competitive interest rate.
Checking your credit score is a worthwhile exercise. It can help you negotiate better deals or understand why a lender rejected you. If you spot any errors in your credit report, you can fix them for free by contacting the credit reporting agency.
You can get a copy of your credit report and credit score for free every 3 months. Check your credit report for free by contacting one of these credit reporting agencies:
Simply call to get your credit score on the spot or access your report online within a day or two. You could have to wait up to 10 days to get your report by email or mail.
You can also obtain your credit report through government financial guidance site Moneysmart, or financial comparison sites like Canstar.
Guaranteed security
Having a family member or friend with good financial status and credit history act as a guarantor application could improve your chances of being approved for a student car loan. This means they co-sign the loan and agree to accept responsibility for the repayments if you default for any reason. Your guarantor acts as a type of security, making it less risky for your lender to loan you the funds.
You might even be able to borrow a larger amount and secure a lower interest rate if you have a guarantor on your personal loan, which means you’ll save money over the life of the loan.