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What is a personal loan for education?

There are certain expenses that inevitably arise when you've made the decision to further your education. And many students in Australia rely on personal loans to assist with some of these costs.

There's a range of study expenses that education personal loans can help pay for, including the following:

  • Daily expenses
  • Studying abroad
  • School supplies
  • University tuition fees
  • Private education tuition fees
  • Tertiary education tuition fees
  • Other course fees

Why do people use personal loans for education?

Personal loans can come in handy for students who:

  • aren’t supported by their parents;
  • lack sufficient savings to afford the costs of studying, and/or;
  • aren't eligible for government assistance.

As many students are unable to work full time due to their study load, a personal loan may be helpful. Finding a suitable personal loan with a competitive rate can assist students with living expenses, school supplies, studying abroad and tuition.

Easing the financial stress that can come with higher education allows students to focus more attention on their studies and invest in their future careers.

What kind of government assistance may be offered to eligible students?

Some Australian students may be eligible for certain types of government loans or other financial assistance to help pay for education expenses. It might be worth exploring your options before applying for a personal loan.

HELP loans

Those who are offered a commonwealth supported place in a university degree will generally be eligible for a HECS-HELP loan from the Australian government. A HECS-HELP loan is a higher education loan program that covers the cost of tuition, allowing students to study now and pay off their tuition later. 

It's important to remember that while a HECS-HELP debt won't accrue interest per se, it's still subject to inflation and is a liability that has requirements in terms of how and when it is to be paid off. 

For further information, visit the Study Assist government website.

VET Student Loans

Formerly known as VET FEE-HELP loans, VET Student Loans are similar to HECS-HELP loans in that they assist with the cost of tuition. The way in which they differ is that they are offered to students undertaking vocational education and training (VET) courses as opposed to university degrees.

Centrelink payments

Centrelink is a government agency that provides social security payments and services to Australians. Eligible students, trainees and apprentices may be eligible for financial help with everyday costs of living, as well as some study expenses.

The main income support payments offered by Centrelink are Youth Allowance, Abstudy or Austudy, each of which have separate eligibility requirements. Those who are eligible may also be approved for Rent Assist which is an additional payment that can be used towards the cost of rent.

How can I compare student personal loans?

Not all personal loans for education are the same. Once you have an idea of the loan amount you wish to borrow, the next step is to compare rates, fees, features and other factors during your search in order to find the most suitable option for you.

Here are some of the key factors to consider:

Interest rate: Finding a personal loan with a competitive interest rate can help keep costs down, but remember to also pay attention to any fees payable.

Comparison rate: A loan's comparison rate can give you an idea of the overall cost, as it includes both the interest rate and the main fees.

Loan term: Determine how long you think you will need to pay off the loan. The longer the loan term, the lower your repayments will typically be. However, while a shorter loan term might mean higher monthly repayments, the total amount you spend on interest will likely be lower.

Features: Some loan features might be more important to you than others. Here are some you might like to consider:

  • Extra repayments – Most banks will allow borrowers to give more than what is owed on their monthly loan repayments. This can help shorten the period of the loan and the interest paid. Check to see whether your preferred loan product has a limit on extra repayments.
  • Redraw facility – This option allows students to borrow money already paid on their loan that is in excess of regular repayments.
  • Fully drawn advance – This feature lets borrowers receive the fixed amount on their loan upfront with a plan to repay at a later date. This could be a good option for students who anticipate full employment post-graduation.

Secured vs unsecured: Personal loans fall under two categories: a secured personal loan or an unsecured personal loan. A personal loan for education will typically be an unsecured student loan since there is no collateral, such as new car, involved in the lending.

What are the pros and cons of student personal loans?
  • Could ease a financial burden and allow students to focus more on what’s important: a higher education.
  • May be a helpful financial support to those students who are ineligible for government assistance.
  • Students who are not working or only work part-time/casually could see higher interest rates and may require a co-signer.
  • Student personal loans for bad credit are sometimes available but tend to have less favourable features than standard student personal loans.

You might like to consider using RateCity’s helpful comparison tools, such as our personal loan repayment calculator and personal loan comparison table, to find the best available loan for your financial situation.

Frequently asked questions

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Can I get a $4000 personal loan if I’m unemployed or on Centrelink?

Before most providers of personal loans or medium amount loans will approve an application, they’ll want to know you can afford the loan’s repayments on your current income without ending up in financial stress. Several lenders don’t count Centrelink benefits when assessing a borrower’s income for this purpose, so these borrowers may find it more difficult to be approved for a loan.

If you’re unemployed, self-employed, or if more than 50% of your income come from Centrelink, consider contacting a potential lender before applying to find out whether they accept borrowers on Centrelink.

What do single parents need for a personal loan application?

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of assets (e.g. car, home)
  • Details of liabilities (e.g. credit cards, other loans)
  • Loan amount
  • Loan term

Can I include my spouse’s income on a personal loan?

If you apply for a joint personal loan with your spouse, you can include their income on the application. If approved, they then become jointly liable for the loan.

Both you and your spouse need to meet the eligibility criteria, such as income, age, and residency requirements, as stipulated by the lender. A joint loan could increase your chance of approval for a higher amount, as both borrowers’ incomes are assessed when determining borrowing capacity. 

What are the Westpac personal loan eligibility criteria?

The process to apply for a personal loan from Westpac is simple and can be done online. To be eligible for a Westpac Bank personal loan, you must meet the eligibility criteria. These include:

  • You should be over 18 years old
  • You must be a permanent resident or hold a valid visa with confirmed employment in Australia
  • You should earn a regular and permanent income of at least $35,000 before taxes

If you feel you meet these eligibility criteria, you can apply for a personal loan with Westpac. With your application form, you’ll also have to submit the following documents:

  • Personal details including name, contact information, and residential address 
  • Proof of identity such as drivers licence or passport details
  • If you’re self-employed, you’ll need a list of assets, savings, investments, and liabilities as well as your most recent tax return information
  • If you’re an employee you’ll need to submit information related to your employment and finances like bank statements and payslips

Westpac Australia personal loans are available for amounts from $4,000 up to $50,000 and loan terms of up to seven years.

What is a credit rating/score?

Your credit rating or credit score is a number that summarises how credit-worthy you are based on your credit history.

The lower your score, the more likely you are to be denied a loan or forced to pay a higher interest rate.

What do credit scores have to do with personal loan interest rates?

There is a strong link between credit scores and personal loan interest rates because many lenders use credit scores to help decide what interest rates to offer to potential borrowers.

If you have a higher credit score, lenders will probably classify you as a lower-risk borrower. That means they’ll be keen to win your business, so they may offer you a lower interest rate if you apply for a personal loan.

If you have a lower credit score, lenders will probably classify you as a higher-risk borrower. That means they might be concerned about you defaulting on the loan and costing them money. As a result, they might protect themselves by charging you a higher interest rate.

Can I apply for a quick loan online?

While some lenders will require you to provide paperwork in person, many lenders will allow you to make an application for quick personal loan online. You’ll still need to provide information on your identity, income, and loan purpose in most cases.