mother and daughter

Guide to Parent Student Loans

Weighing your child’s college education against keeping your own debt manageable is a tough balancing act. Parent student loans could help you fill gaps when other student aid falls short.

There are a variety of student loans available to parents who are interested in helping their child pay for college. Parents can consider either federal or private student loans. Parent PLUS Loans are federal student loans available to parents. Private lenders will likely have their own loans and terms available for parent borrowers.

It’s important to note here that figuring out how to fund your child or children’s education is a personal and individualized decision. Continue reading for an overview of the different loan types available to parents and some important considerations to make before borrowing money to pay for your child’s education.

Types of Parent Student Loans

Parent borrowers can consider borrowing a federal student loan or private student loan. Here are a few of the different types of loans to consider.

Parent PLUS Loans

Parent PLUS Loans are federal student loans that are available to parents of dependent undergraduate students through the Department of Education. They offer fixed interest rates — 6.28% for the 2021 to 2022 academic year. On the plus side, eligible parents can borrow up to the attendance costs of their child’s school of choice, less other financial aid.

The amount eligible parents can borrow is not limited otherwise, so this can be a useful loan to fill in whatever tuition gaps aren’t covered by other sources of funding. These loans also provide flexible repayment options, such as graduated and extended repayment plans, as well as deferment and forbearance options.

As far as federal loans go, interest rates on Parent PLUS Loans are relatively high. So, it may be worth considering having your child take out other federal loans that carry lower interest rates. Parent PLUS Loans may also come with a relatively high origination fee of 4.228% for the 2021 to 2022 academic year .

Applying for Parent PLUS Loans

To apply for a Parent PLUS Loan, parents will have to fill out the Free Application for Federal Student Aid, or FAFSA®. In addition to the FAFSA, there is a separate application form for Parent PLUS Loans . Most schools accept an online application. For any questions, contact the school’s financial aid office.

Unlike other federal student loans, there is a credit check during the application process for Parent PLUS loans. One of the eligibility requirements is that borrowers not have an adverse credit history. Though, parents who do not qualify for a Parent PLUS Loan due to their credit history, may be able to add an endorser in order to qualify. An endorser is someone who signs onto the loan with the borrower and agrees to make payments on the loan if the borrower is unable to do so.

Repaying a Parent PLUS Loan

​​PLUS Loan terms are limited to 10 to 25 years, depending on the chosen repayment plan , and do not offer income-driven repayment plans like other federal loans do (although they may be eligible for the Income-Contingent Repayment Plan if they are consolidated through a Direct Consolidation Loan).

Parents have the option of requesting a deferment if they do not want to make payments on their PLUS loan while their child is actively enrolled in school. If a parent does not request deferment, payments will begin as soon as the loan is disbursed.

Keep in mind that interest will continue to accrue during periods of deferment, so deferring payments while your child is in school may increase the overall cost of borrowing the loan.

Private Parent Student Loans

In some cases it might make sense to turn to private lenders for student loans. If you have a solid credit history (among other factors), you may be able to secure a reasonable interest rate.

Recommended: Private vs. Federal Student Loans

Before taking on a private student loan, here are some things to be aware of:

•   Always read the fine print.

•   Origination fees will vary from lender to lender.

•   There may not be flexible repayment options, and private loans typically don’t offer deferment or forbearance options the way federal loans do.

•   Also, the amount you may qualify to borrow will likely vary.

The application process for private parent student loans will likely vary based on the individual lenders. Repayment terms and options will also generally vary by lender.

Keep in mind that private student loans don’t offer the same borrower protections, like deferment options, as federal student loans. For this reason, they are typically borrowed after other options, like using savings, federal student loans, and scholarships, have been exhausted.

Cosigning Private Student Loan for Your Child

Cosigning a private student loan with your child means that you both have skin in the game. Cosigning a loan typically means each party is equally responsible for the debt. So if your child stops paying, you’re still on the hook for all of the debt.

Most college-age students have had little chance to build their own credit, so having parents — with better, or at least longer, financial histories — as cosigners might mean a better rate than if they applied on their own.
Parents can work out a plan in which both parents and children make payments, or it may even make sense to have a cosigned loan on which only the child makes payments.

Considerations Before Borrowing a Parent Student Loan

As a parent, of course you want the best for your child and to help them in any way you can. Whether or not you decide to take out a student loan to put your child through school is a decision to weigh carefully.

Your choice will likely have a lot to do with your own financial situation. Consider how taking out student loans may affect your own financial goals, especially retirement.

Staying on track for retirement requires a concerted effort during your earning years. That is in part because it can be more difficult to borrow money to cover your retirement expenses when you’re retired, because you will no longer be earning an income to help you pay back borrowed money.

So, before taking on student debt for your children, you’ll probably want to make sure you’re saving enough for your own future. After all, your children likely have decades of potential earnings after they graduate, during which time they can work to pay off their student loans. You, on the other hand, may not have as much time to pay off new debts and save for other goals.

It may also be worth considering how taking on new debt could affect things like your credit score and your debt-to-income ratio. Lenders consider these factors, among others, when deciding whether to loan you money.

That said, if you feel you are financially strong enough to take on student loans for your child, there are a number of loan options available to you.

The Takeaway

Parent student loans can be borrowed by a student’s parents and used to help pay for educational expenses like tuition. Before borrowing a parent student loan, parents should evaluate their own financial situation and goals, such as retirement savings.

Parents interested in borrowing to help support their children’s education can choose between federal and private parent loans, or may consider cosigning a loan for their child. If you’re considering borrowing a private parent student loan, consider SoFi. The application process is entirely online and borrowers have the option of making interest-only payments while their child is enrolled in school or starting the repayment process up front.

SoFi is a leader in the student loan space — offering private student loans to help pay for school. See your interest rate in just minutes, no strings attached.


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SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Examining How Student Loan Deferment Works

Examining How Student Loan Deferment Works

If you’re struggling under a mountain of student debt, you’re not alone. After all, the average debt load for a recent undergrad is around $30,000.

The worst thing to do when experiencing difficulty repaying student loans is to just stop making payments. If more than 270 days pass on a federal student loan payment, or three months pass on a private student loan payment, they could become one of the millions of student loans in default.

Student loan deferment allows eligible borrowers to temporarily reduce loan payments or pause them. It’s a popular choice: As of the fourth quarter of 2021, 3.1 million borrowers owing a combined $112.9 billion had their loans in deferment.

Borrowers who are struggling to afford their monthly student loan payments, may consider looking into student loan deferment. But while it could be a good option for temporary relief, other solutions for reducing payments in the long term may be required.

Private student loans may or may not offer deferment options to borrowers. If you have questions about your private student loan, check in with your lender directly.

What Is Student Loan Deferment?

Student loan deferment lets borrowers temporarily pause, or reduce, their monthly student loan payments. For federal student loans, deferment may last for up to three years, depending on the type of loan. Depending on the type of loan a borrower has, interest may continue to accrue while the loan is in deferment.

As mentioned, private lenders may or may not offer deferment options for borrowers.

How Does Student Loan Deferment Work?

Typically, borrowers will need to apply to defer payments on their student loans. To defer payments on a student loan, borrowers will generally need to file some sort of form or paperwork with their loan servicer.

In most cases, borrowers seeking a deferment will need to provide their loan servicer with some form of documentation that indicates they meet the eligibility requirements to receive a deferment.

Deferments are available on federal loans including Direct Loans, FFEL Program loans, and Perkins Loans.

If a private lender offers deferment, they will likely have their own forms and requirements.

Why Defer Student Loans

Borrowers who are facing financial difficulty may find that deferring their student loans offers them the opportunity needed to stay afloat financially. Deferment makes sense if the borrower is facing short-term difficulty paying their student loans.

Deferring student loans also won’t directly impact a borrower’s credit score.

Why Not Defer Student Loans

If you’re able to stay on top of your loan payments, then deferment doesn’t make sense. If you think that you may have long-term difficulty making your monthly loan payments, deferment may not be the best option either.

As mentioned, interest may continue to accrue during deferment, depending on the type of loan you have. In the case that interest continues to accrue, at the end of the deferment period, this interest will be capitalized on the existing loan amount (or the principal loan value). Moving forward, interest will be calculated based on this new total. So essentially, you are accruing interest on top of interest, which can significantly increase the amount of interest owed over the life of the loan.

Pros and Cons of Student Loan Deferment

Student loan deferment can help borrowers who are struggling financially, but it may not be the right choice for everyone. Here are some pros and cons to consider when evaluating deferment options for federal student loans.

Pros

Cons

Borrowers are able to temporarily suspend or lower the monthly payments on their student loans. On most federal student loans, interest continues to accrue. This may dramatically increase the total cost of borrowing over the life of the loan.
Borrowers may qualify for deferment for periods of up to three years. Because interest may continue to accrue during deferment, other options like income-driven repayment plans, may be more cost effective in the long-term.

Types of Student Loan Deferment

For federal student loans, there are a few different deferment options . Here are the details on some of the most common reasons borrowers apply for deferment.

In-School Deferment

Students who are enrolled at least half-time in an eligible college or career program may qualify for an in-school deferment. If you are enrolled in a qualifying program at an eligible school this type of deferment is generally automatic. If you find the automatic in-school deferment doesn’t kick in when you are enrolled at least half-time in an eligible school, you can file an in-school deferment request form .

Unemployment Deferment

Those currently receiving unemployment benefits or who are actively seeking and unable to find full-time work may be able to qualify for unemployment deferment. Borrowers can receive this deferment for up to three years.

Economic Hardship Deferment

This type of deferment may be an option for those borrowers who are receiving merit-tested benefits like welfare, who work full-time but earn less than 150% of the poverty guidelines for your state of residence and family size, or who are serving in the Peace Corps.

Economic hardship deferments may be awarded for a period of up to three years.

Military Deferment

Members of the U.S. military who are serving active duty may qualify for a military service deferment.
After a period of active duty service, there is a grace period in which borrowers may also qualify for federal student loan deferment.

Cancer Treatment Deferment

Individuals who are undergoing treatment for cancer may qualify for deferment. There is also a grace period of six months following the end of treatment.

Other Types of Deferment

There are other situations and circumstances in which borrowers might be able to apply for deferment. Some of these include starting a graduate fellowship program, entering a rehabilitation program, or being a parent borrower with a Parent PLUS Loan whose child is enrolled in school at least half-time.

Consequences of Defaulting on Federal Student Loans

And unlike other debt, student loan balances are generally not eligible to be discharged in bankruptcy. Defaulting on your federal student loans can lead to:

•   Immediately owing the entire balance of the loan

•   Losing eligibility for forbearance, deferment, or federal repayment plans

•   Losing eligibility for federal student aid

•   Damaging the borrower’s credit score, inhibiting the ability to qualify to purchase a car or a house or qualify for credit cards in the future

•   Withholding of federal benefits and tax refunds

•   Garnishing of wages

•   The loan holder taking the borrower to court

•   Inability to sell or purchase assets such as real estate

•   Withholding of the borrower’s academic transcript until loans are repaid

Consequences of Defaulting on Private Student Loans

The consequences for defaulting on private student loans may vary by lender but could include repercussions similar to federal student loans, and more, including:

•   Seeking repayment from the cosigners of the loan (if there are any cosigners)

•   Calls, letters, and notifications from debt collectors

•   Additional collection charges on the balance of the loan

•   Legal action from the lender, suing the borrower or their cosigner

To avoid these negative consequences, one option for borrowers struggling to pay federal student loans is deferment.

Who Is Eligible for Student Loan Deferment?

To be granted a deferment on federal loans, borrowers need to meet certain criteria.

You may be eligible if you’re:

•   Enrolled at least part-time in college, graduate school, or a professional school

•   Unable to find a full-time job or are experiencing economic hardship

•   On active military duty serving in relation to war, military operation, or response to a national emergency

•   In the 13-month period following active duty

•   Enrolled in the Peace Corps

•   Taking part in a graduate fellowship program

•   Experiencing a medical hardship

•   Enrolled in an approved rehabilitation program for the disabled

Borrowers who re-enroll in college or career school part-time may find that their federal student loans automatically go into in-school deferment with a notification from their student loan provider.

Loans may also keep accruing interest during deferment — depending on what kind of federal student loans the borrower holds. Borrowers are still responsible for paying interest if they have a:

•   Direct Unsubsidized (Stafford) Loan

•   Direct PLUS Loan

If you don’t pay the interest during the deferment period, the accrued amount is added to your loan principal, which increases what you owe in the end.

Recommended: Student Loan Deferment in Grad School

To request a deferment, borrowers will need to submit a form to their loan servicer. As a part of the process, it’s likely that they’ll be asked to provide documents to prove eligibility.

What If You Have Private Student Loans?

Private lenders aren’t required to offer deferment options, but some do. For example, some might allow you to temporarily stop making payments if you:

•   Lose your job

•   Experience financial hardship

•   Go back to school

•   Have been accepted into an internship, clerkship, fellowship, or residency program

•   Face high medical expenses

Typically, even while a private student loan is in deferment, the balance will still accrue interest, meaning in the long-term the borrower will pay a larger balance overall, even after the respite of deferment.

In most cases, even with accrual of interest and limited options, deferment is preferable to defaulting. Borrowers with private loans could contact the lender to ask what options are available.

The Limits of Student Loan Deferment

Keep in mind that deferment is not a panacea. By definition, it’s temporary. Federal student loan borrowers will ultimately need to go back to making payments once they are no longer deferment-eligible. For example, a borrower’s deferral might end if they leave school, even if their ability to pay has not improved.

Federal loans can only be deferred due to unemployment or financial hardship for up to three years. With private loans, there may not be an option to defer at all, and if it is an option, the limit may be no more than a year.

Other Options for Reducing Federal Student Loan Payments

Besides student loan deferment, you have other choices if you can’t afford the total cost of your monthly payments. With federal loans, you can request a forbearance.

Income-Driven Repayments

A longer-term solution could be signing up for an income-driven repayment plan.

Borrowers who qualify, may be able to reduce their monthly payment based on their income. Enrolling in an income-driven repayment plan won’t have a negative impact on your credit score or history. However, income-driven plans aren’t always the lowest monthly payment option, so you might want to look at all options before applying to one. On certain income-driven repayment plans, student loan balances can be forgiven after 20 or 25 years, depending on the payment plan that the borrower is eligible for.

Remember, with an income-driven repayment plan, monthly payment is based on the borrower’s total discretionary income. That means if someone changes jobs, or sees a significant increase in their paycheck, they’ll be expected to pay a higher monthly bill on the student loan payment.

Forbearance

Here’s the high-level overview of how deferment vs. forbearance compare. There are two types of forbearance for federal student loan holders: general and mandatory.

General student loan forbearance is sometimes called discretionary forbearance. That means the servicer decides whether or not to grant your request. People can apply for general forbearance if they’re experiencing:

•   Financial problems

•   Medical expenses

•   Employment changes

General forbearance is only available for certain student loan programs, and is only granted for up to 12 months at a time. At that point, you are able to reapply for forbearance if you’re still experiencing difficulty. General forbearance is available for:

•   Direct Loans

•   Federal Family Education Loan (FFEL) Program loans

•   Perkins Loans

Mandatory forbearance means your servicer is required to grant it under certain circumstances. Reasons for mandatory forbearance include:

•   Serving in a medical residency or dental internship

•   The total you owe each month on your student loan is 20% or more of your gross income

•   You’re working in a position for AmeriCorps

•   You’re a teacher that qualifies for teacher student loan forgiveness

•   You’re a National Guard member but don’t qualify for deferment

Similar to general forbearance, mandatory forbearance is granted for up to 12 month periods, and you can reapply after that time. You still have to pay interest on all types of your federal loans while they’re in forbearance.

Another Option to Consider: Refinancing

Another long-term solution, depending on personal financial circumstances, could be student loan refinancing. Some private lenders can consolidate a borrower’s loans, whether federal or private. Qualifying borrowers may be able to secure a lower interest rate or options to lengthen the term to reduce monthly payments. Note that lengthening the repayment period may lower monthly payments but will generally result in paying more interest over the life of the loan.

Refinancing could be a good option for borrowers with strong credit and a solid income, among other factors. Unlike an income-driven repayment plan, a borrower’s monthly payment wouldn’t change strictly based on their income.

Some may find that they are not able to qualify for student loan refinancing on their own. In that case, some lenders may offer the option to apply for refinancing with a cosigner. A very important note: Refinancing federal student loans eliminates them from any federal borrower protections or payment plans. So, borrowers who are taking advantage of things like income-driven payment plans or deferment generally won’t want to refinance. But for other borrowers, student loan refinancing might be a good long-term solution.

Refinancing your federal and private loans can roll many loans into one new loan with one new rate and new monthly payment. So in addition to potentially saving you money on interest, refinancing could also simplify your repayment process.

Deferment FAQs

How long can you defer student loans for?

Depending on the type of deferment you are enrolled in, federal loans can be deferred for up to three years. Private student loans may not offer an option to defer payments, and if they do, the limit will be set by the individual lender.

Why would you defer student loans?

Deferment can be helpful if a borrower is facing a temporary financial hurdle, because they are allowed to pause payments for a period of time.

Are there any reasons not to defer student loans?

Most loans will continue to accrue interest during periods of deferment. When the deferment is over, this accrued interest is then capitalized on the loan. This means it’s added to the existing value of the loan. Moving forward, interest is charged based on this new total. This can significantly impact the total amount of interest that a borrower has to pay over the life of a loan.

The Takeaway

Deferment allows borrowers with federal student loans to temporarily pause student loan payments under certain circumstances, such as enrollment in a graduate program. Depending on the type of loan, borrowers may be able to qualify for forbearance, which is another option that allows borrowers to temporarily pause payments on federal student loans, to help those who may be experiencing temporary financial difficulty.

Income-driven repayment plans may be another option for federal student loan borrowers who are experiencing longer-term issues making monthly payments on their student loans. Borrowers who aren’t taking advantage of these federal student loan programs may consider refinancing with a private lender as an option to either potentially secure a lower interest rate or adjust the repayment terms on their loan.

Student loan debt getting you down? Learn more about refinancing student loans with SoFi.


*Guaranteed Rate Match Offer: Your pre-qualified rate, and the rate match program itself, are conditional upon our verification of your application information, including verification of sufficient income to support an ability to repay. Eligible documentation of a competitor’s rate offer, issued within 30 days of your SoFi pre-qualified rate, will be determined at SoFi’s sole discretion and must be for the same loan amount and term. SoFi will only match rate offers for private student loan refinance products. The match will be on the rate, exclusive of all discounts. The $100 Rate Match Bonus is not available to residents of Ohio. To receive the $100 Rate Match Bonus, you must: (1) register and/or apply for a student loan refinance (2) provide documentation of an eligible competitive rate offer; (3) call at (855) 456-SOFI (7634) or chat on SoFi.com and follow the instructions to send in your proof of lower rate; (4) have and provide a valid US bank account to receive bonus; (5) complete Form W-9; (6) and meet SoFi’s underwriting criteria and book a student loan refinance with SoFi. Once conditions are met and the loan has been disbursed, you will receive your Rate Match bonus via automated clearing house (ACH) into your checking account within 30 calendar days. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. Additional terms and conditions may apply. SoFi may discontinue this program at any time.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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What to Know Before You Borrow Money Online

What to Know Before You Borrow Money Online

There are a variety of ways to borrow money when cash is needed. A few common places to start might be traditional banks or credit unions, or maybe a friend or family member who’s willing and able to consider lending.

If none of those options sound appealing, another option might be to borrow money online. Online lenders are becoming a more mainstream, acceptable alternative to traditional banks. What’s behind this increase in online lending, and what are some ways to borrow money online?

Why Have Online Lenders Grown in Popularity?

When lockdowns started in response to Covid-19 in 2020, people had to find different ways to do things they might have been accustomed to doing in person. Banking and other financial transactions were among those things. Brick-and-mortar banks limited access to branches or hours they were open, and retailers were hesitant to accept physical money. But transactions needed to keep happening, so consumers began moving online to complete them.

Familiarity, for Some Customers

A growing proportion of consumers is accustomed to using computers for many aspects of daily life, and making online financial transactions is no different. More people may be looking for things like:

•   Online applications.

•   Streamlined underwriting processes.

•   Automated funds transfers.

A Different Kind of Personal Service

Whereas in the past, personalization meant having a face-to-face relationship with a banker, personalization in today’s world can mean information that is relevant to an individual’s financial needs. This might look like things that can be more quickly accessed online, such as:

•   Personalized financial trends in a portfolio so they can make informed decisions about their financial goals.

•   Insights about their spending and saving so they can budget monthly income and expenses to meet their needs.

Time Saving

Customers may also want an experience that saves time. Automating tasks is a timesaver that can easily be done with online financial tools. In the case of online lending, the option to set up automatic bill payments and automate other tasks are likely to be considerations when a customer is choosing an online financial company.

Where To Borrow Money Online

When looking for an online lender, elements to consider might be the reputation of the lender, safety precautions the lender has in place, or types of loan products offered. Each person, also, should determine their individual comfort level of doing business with or without personal interaction.

Banks

A traditional bank may be a good option for someone who is more comfortable sharing private financial information at an in-person meeting or who doesn’t know how to borrow money online. Applying for a loan through a traditional bank might include a visit to a brick-and-mortar branch of the bank along with online components, making this a hybrid approach. Since traditional banks have upkeep costs related to physical locations, their fees or interest rates might be higher than other lending options.

Credit Unions

Similar to banks, credit unions generally have physical locations, but may also have online services. Financial services offered by credit unions are similar to banks and other financial institutions. There are usually specific requirements to be a member of a credit union, such as employment-related or residence in a particular region, or membership in a particular group. Credit unions may offer member benefits such as low fees, high savings rates, and low loan rates.

Peer-to-Peer Lending

Peer-to-Peer (P2P) lending is akin to matchmaking. A prospective borrower submits an application with an online marketplace, which matches the applicant with investors. Some online marketplaces for P2P lending are Prosper, Upstart, and Peerform. P2P lending may be a good place to look for an online loan for someone who isn’t able to qualify for a loan from a conventional lender, or if an alternative funding source is preferred.

Recommended: What Are P2P Transfers & How To Use Them

Online Lenders

The lack of brick-and-mortar branches might deter some customers, but attract others. The deciding factor for some customers might be how well the process works for them, with less emphasis on having a face-to-face interaction. Another factor in choosing online lending over in-person may be the speed of the process. Online loans and other financial transactions can sometimes be completed faster than going into the physical location of a traditional lender.

Options to Think Twice About

Along with favorable options for lending that are available, there are some that may not bring about the best financial outcomes.

Credit Cards

At its core, a credit card is a short-term loan — specifically, a line of credit. If the account balance is paid in full before each month’s due date, it’s a no-interest loan. Financial drawbacks arise, however, when that balance is not paid in full each month, carrying over a balance due. Credit card interest rates tend to be high, and they accrue on any unpaid balance, compounding what is owed in the next billing cycle. The average credit card annual percentage rate (APR) is currently 18.24% for new credit card offers. Even for existing customers, the APR is high, at an average of 14.54% currently. It’s easy to see how this can lead to a cycle of debt. Paying off a loan over time is probably more efficiently done with other financial tools.

Recommended: Tips for Using a Credit Card Responsibly

Predatory Lenders

When people look for fast cash, there is probably someone out there who is willing to lend it to them — at a cost. If it seems like there is no other choice available, some people may take on a loan that can be difficult to pay off. Repeat borrowing is common with these types of loans.

•   Payday loans are short-term loans, typically to be paid off in the borrower’s next payday. Interest rates are extremely high, often 400% or more.

•   Title loans or pawn loans use a borrower’s vehicle or other item of value as collateral. The APR on a title loan can be as much as 300%, and lenders often charge additional fees.

The Takeaway

Choosing a lender depends on different factors for different people. Traditional lenders, online lenders, alternative lenders — each can be a valid choice for different financial needs. With online lenders becoming more commonplace, with established reputations in the financial marketplace, looking at options among them might be a good choice.

SoFi is committed to helping its members make sound financial decisions, including sound borrowing decisions. Personal loans from SoFi come with fixed interest rates and terms that work with a variety of budgets and for different financial needs — and no fees.

Learn more about SoFi Personal Loans


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Can You Get a Loan With No Bank Account? Everything You Need to Know

Can You Get a Loan With No Bank Account? Explained

Sometimes, it can feel like you have to have access to money to get access to money. But when you’re in a tight financial spot, you may not have time to get your financial ducks in a row by setting up a bank account in your name. So if you don’t have a bank account, is it possible to get a loan?

The short answer: While it’s not impossible, it will likely be difficult to be approved, cost more in interest and fees, and may require collateral to guarantee the loan. But if you need money fast, there are options available.

Is It Hard To Get a Loan With No Bank Account?

When a lender assesses an applicant, they consider how risky the loan might be to their own business. In other words: They want to predict how likely it is that the borrower will be able to pay the loan back. One way they do this is to assess the applicant’s credit score because a bad credit score may mean the loan is riskier to the lender. When a loan applicant doesn’t have a bank account, the lender has more difficulty assessing their money history and credit score. There is little way to verify income or cash flow.

There is also a logistical issue: Where should the lender send the loan proceeds? Typically, the money is sent to the borrower’s bank account. But if the borrower doesn’t have a bank account, there may be some question of where the money will be deposited and how it will be accessed.

If you only have a joint bank account and want to separate your finances from the other bank account holder, it may make sense to set up a different, individual bank account before applying for a personal loan.

Borrowers may have more options available to them if they have a bank account in their name. But if a financial emergency arises and they do need money quickly, there may be options available that do not require a bank account. But these options may charge high interest, multiple fees, or could be challenging to pay back.

Can I Get a Loan With Bad Credit And No Bank Account?

As lenders consider a borrower’s risk, they will look at a borrower’s credit history. Credit history is one factor that determines whether a borrower’s unsecured loan application is approved and, if it is, at what interest rate. Applicants with poor credit and no bank account may be seen as a risk to lenders, and their application for an unsecured loan may not be approved.

They may, however, be eligible for a secured loan that’s backed by collateral, like a car or other asset of value, owned by the borrower. If the terms of the loan aren’t fulfilled and the lender isn’t paid back, the lender has the right to take that collateral as payment on the loan.

No Bank Account Loan Options

If you don’t have a bank account, you may be able to access a loan. But it may be more expensive and challenging than it would be for borrowers with a bank account. Weighing the pros and cons of each option can help you determine the right path for you. Potential options include:

Borrowing Money From Loved Ones

If you’re having a hard time financially, your loved ones may be able to step in. Whether you’re asking for money from friends or family, it’s a good idea to have clear, written loan terms, and maybe even have the loan agreement notarized so there’s no confusion. Make sure expectations are clear for each party.

•   Does the loan have interest attached?

•   Are you expected to pay back the loan or is it a gift?

•   Are there in-kind options for paying back the loan, such as babysitting or tutoring hours?

•   What would happen if you were not able to pay back the loan?

Answering these questions can help create clear expectations and lessen the chance of misunderstanding.

Payday Loan

A payday loan is usually for a small amount, often $500 or less, for a short period of time, typically until the borrower’s next paycheck. While it can be a source of quick cash, payday loan problems are pronounced, given their high annual percentage rates (APRs). Some states may cap the maximum allowable APR, but many payday loans charge fees of $10 to $30 for every $100 borrowed, which can equate to up to 400% on a loan of $500.

A payday loan may require the borrower to have a bank account. When the loan is approved, the borrower gives the lender a signed and postdated check. Because the check is postdated for the day your paycheck is deposited into your bank account, the lender can cash the check on that date if you haven’t paid the loan by then. If there are insufficient funds in the bank account, then you may have additional fees from your bank, as well as fees from the lender.

Risk of Payday Loans

The drawbacks of a payday loan may outweigh the benefits. Because of the significantly high-interest rates and fees associated with payday loans, they can cost a borrower even more than credit card debt. Having a plan in place for paying back the interest on a payday loan can be critical in making sure a payday loan fits into an overall financial plan. If a borrower needs to make ends meet for a few days until a paycheck clears, it may make sense to consider other options.

Title Loans

If you own your vehicle, you may be eligible for a title loan. Also called an auto title loan or vehicle title loan, this type of loan uses your vehicle as collateral. The lender holds your vehicle title in exchange for the loan. You then may be able to borrow an amount of money up to the value of the car. As with payday loans, interest can be quite high — as high as 300% — and there may be additional fees. If you are unable to pay back the loan, the lender has the right to take ownership of your vehicle. This can be a high-stakes situation for borrowers who depend on their car to go to work and school.

Pawn Shop Loan

Someone with a valuable piece of jewelry, an antique, or other collectibles to use as collateral may consider seeking out a pawn shop loan. The pawnbroker will assess the value of the item and provide a loan based on a certain percentage of its value. The loan terms will include interest. If the loan isn’t paid back according to the terms, the pawnshop then owns your item and can sell it.

Loan Options With a Bank Account

Borrowers with a bank account may have more options available to them than borrowers without a bank account. Having a bank account and proof of income may make a borrower seem less risky to a potential lender and offer more options and flexibility in comparing rates and finding a loan that works for them. Some types of loans available to people with a bank account may include:

Personal Loans

What are personal loans? A personal loan is a lump sum of money to be paid back, with interest, to a lender. One of the typical benefits of personal loans is a fixed interest rate and a payment that will be the same each month. The length of a personal loan can be between one to seven years, typically.

Because of the fixed interest rate of many personal loans, some uses of personal loans may be to consolidate other higher-interest debt, to pay for a large purchase, or to pay home remodeling expenses.

Auto Loan

If you’re buying a car, an auto loan specifically designed for purchasing a vehicle may make sense. As with other loans, a lender typically looks at the applicant’s credit history, income, and other factors to approve the loan at a certain interest rate.

Student Loans

To fund educational expenses, a federal or private student loan might be appropriate. Student loans don’t necessarily just cover tuition — they can also be used for other education-related expenses and living expenses while the borrower is in school.

Your school’s financial aid office may have tips and resources for accessing loans, scholarships, or grant funds if you don’t have a bank account. It may also be a good idea to talk to the financial aid office at your school about paying back any student loans you accept to make sure you’re not borrowing more than you can afford to repay.

Recommended: Grants For College – Find Free Money for Students

The Takeaway

Options for loans are probably more easily found for borrowers with bank accounts and solid credit history. But borrowers who don’t have either may still have options. Considering the pros and cons of each avenue can help a borrower decide on their best course of action.

If you do have a bank account, then you may want to consider a personal loan. As with any financial step, consider the pros and cons of all options and choose a loan that fits into your overall financial goals. With SoFi, you can apply for a personal loan via an easy, online application and view your rate in just one minute. Checking your rate won’t hurt your credit score.* SoFi Personal Loans have fixed rates and terms that fit a variety of budgets.

Check your rate at SoFi

Photo credit: iStock/MicroStockHub


*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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Paying for College Without Parents Help

Paying for college without support from parents may seem like an overwhelming proposition, but it’s possible. Making college affordable without parental support may start before you even choose a college, by reviewing tuition and financial aid available to you at the colleges and universities you are interested in attending. Choosing the right college for you can go a long way in helping you pay for your education.

Other strategies that could help you make college more affordable include applying for scholarships and working through college. Each student is in a unique financial situation, and you may find a combination of these strategies can provide the help you need in order to pay for college. These strategies could also be used by students who do have parental assistance.

Strategies to Help Pay for College Without Parental Support

Finding the resources to pay for college can be a challenge and if you’re embarking on this journey alone, it may be stress inducing. These strategies and ideas could help you craft a plan that allows you to pay for college. As mentioned, a combination of these ideas may be required based on your unique financial situation.

Choosing the Right College

The best college for your situation lies at the intersection of ones that provide the programs you need to achieve your career goals and the ones you can afford.

Decisions you’ll need to make include:

•   Living at home or in a dormitory or other housing by the college

•   Choosing between a public or private college

•   Picking between in-state and out-of-state colleges

Living at Home

If you can live near the college, rent-free, or at low cost, then this is likely the most cost-effective choice. Perhaps you have family members who, although they can’t otherwise help you with college, will allow you to live with them while you pursue your education. Or maybe you could rent a cost-effective apartment near a community college or other school that doesn’t require freshmen to live in a dorm.

Considering Private vs Public Colleges

Public colleges are, generally speaking, less expensive than private colleges. According to The College Board, for the 2021 to 2022 school year, the average cost for tuition and fees at four year private institutions was $38,070, compared to the public college average which was $27,560 for out-of-state students attending a state school.

Prices get even more reasonable if you attend school in your home state and receive in-state tuition; The average cost of in-state tuition and fees was $10,740.

In general, in-state universities are more affordable than going out of state. But the difference between out-of-state and in-state students can vary widely, so check into your colleges of choice for confirmation. Factor in traveling costs for out-of-state options and also consider online college programs where you can take classes no matter where you are located.

Starting at a Community College

Completing your first two years of study at a community college is another option that could dramatically reduce the overall cost of college. In addition to less expensive courses, it may be possible for you to live at home, another financial benefit of attending community college.

Applying for Relevant Scholarships

Because scholarships don’t typically need to be repaid, they are a valuable tool to help fund your college education. If you’re finishing high school, talk to your guidance counselor about possibilities. There are often local scholarships provided by businesses and civic groups that you can apply for.

These days, you can also find a lot of scholarship opportunities online. There are often major-specific opportunities and more general offerings. It’s worth investing a bit of time in researching and applying for scholarships — a couple hours could really be worth it when those scholarship offers start rolling in.

Recommended: What Is a Merit Scholarship & How to Get One

As you’re researching scholarships, be sure to find quality opportunities and be wary of scams. Don’t shy away from smaller scholarships. While it would be nice to have one large scholarship to cover your cost of college, smaller scholarships can add up, incrementally chipping away at what you need to afford college. Some scholarships may be location-based. Check out SoFi’s state-by-state financial aid guides for more information on scholarships local to your home state.

When you find a college scholarship of interest, check the guidelines carefully to ensure you qualify and to make sure that you apply in exactly the right way. Fill applications out thoroughly, as early as possible within a scholarship timeline.

Proofread before turning in your applications and note that, although you can often reuse parts of one scholarship application to complete another, each opportunity has unique requirements, formats, and deadlines.

Need to fund your education?
Learn more about SoFi private student loans.


Obtaining Grants to Help Pay for College

Grant funding can come from multiple sources, including state agencies, local organizations, corporations, and more. And as with scholarships, this is money you don’t typically need to pay back. The biggest source of college grant funding comes from the federal government, with one of the best known is the Pell
Grant
.

Federal grants come in different categories, including:

•   Need-based grants which are based upon financial hardship.

•   Merit-based grants awarded to students who exhibit exceptional scholarship and/or community involvement.

•   Grants awarded to specific groups, including students with disabilities, those from under-represented groups, veterans, National Guard members, foster care youth, and those who select certain careers.

Obtaining federal grant funding without help from your parents can be challenging, though. That’s because most federal grants require students to fill out the Free Application for Federal Student Aid (FAFSA®), which, if you are a dependent student, will be considered incomplete without parental information. In the event that your parents are unable to fill out their portion of the FAFSA , you’ll have to contact your college’s financial aid office and show appropriate documentation that verifies that your parents cannot fill out the form.

In certain circumstances, you can obtain independent student status and complete the FAFSA yourself, but parental refusal to help with FAFSA completion might not be enough to gain this status.

Even if you fully support yourself financially and are no longer claimed as a dependent on your parents’ tax forms, this status may not necessarily be granted. See your guidance counselor if you want to explore obtaining this status.

Applying for Student Loans

As mentioned, students that fund their college educations without assistance from their parents often need to craft a financial aid plan that consists of funding from multiple sources. In certain circumstances, students may have found funding from both the federal government and private lenders.

Applying for Federal Student Loans

Federal and private student loans are available, but most federal loans require a portion of your FAFSA to be completed with parental information, unless you have independent student status.

Effective with the Higher Education Opportunity Act of 2008 , college financial aid departments can offer students unsubsidized Stafford loans even if their parental section on their FAFSA isn’t completed, as long as they confirm that parents are not willing to financially help the student or fill out the FAFSA.

Applying for Private Student Loans

You can also apply for private student loans, although, if you don’t have a built up credit history, you may need a cosigner. Private lenders generally evaluate a potential borrower’s credit history, among other factors, as they make their lending decisions. Adding a cosigner with a strong credit history could potentially help secure a more competitive interest rate. If you aren’t able to find a cosigner, it is possible to apply for a student loan without a cosigner.

Another important note is that private student loans may not offer borrower protections like those offered to federal student loan borrowers, such as the option to apply for Public Services Loan Forgiveness. For this reason, private student loans are generally borrowed as a last resort option.

With determination and a willingness to seek out and accept help, students do find ways to fund their college educations without assistance from their parents.

Cutting Costs While Attending College

Smart budgeting and careful spending can help you stay in line with your means as you pay for college. Cutting costs when possible could allow you to save or funnel more money toward college tuition.

If, for example, you plan to rent a room in a house near your college of choice, you can furnish it in funky, eclectic ways using stylish and affordable finds from thrift stores and garage sales. ​If you’re handy, you can even build your own loft bed and other furniture, with plenty of instructions available online.

Recommended: What Percentage of Parents Pay for College?

Food gets expensive quickly. If you’ll be on a college meal plan, choose one that doesn’t include waste. Or if you’re living somewhere where you can cook your own food, plan thrifty meals in advance and shop in bulk. Watch for a slow cooker at rummage sales, and you can cook plenty of delicious soups and more.

Another considerable expense: textbooks. Do your due diligence and shop around to see if there are any used options you can purchase at a discounted rate. If the book you are buying is directly related to your college major, and you plan on saving it for reference in the future, it could be worthwhile to buy the book. If it’s a textbook for an elective class, you could consider renting the textbook which can often be cheaper than buying it brand new.

Working While Attending School

In addition to potentially helping you qualify for financial aid, your FAFSA may qualify you for federal work-study programs. Of course, finding a part-time job that isn’t associated with work-study is also an option.

You will need to determine how many hours per week you can work and still do well in school. And you’ll also need to find a job that is willing to accommodate the work-school balance you require. For example, it’s important to find an employer who will offer flexibility in scheduling during, for example, midterms and final exams.

The Takeaway

Students who are planning on paying for college without their parents’ help can start by choosing an affordable college option, applying for scholarships, getting a part-time job, and applying for federal student aid. As a dependent student, applying for federal aid may be challenging without your parent’s support, because the FAFSA may be considered incomplete without their information.

In the event that other avenues of funding have been depleted, students may consider private student loans. Note that as previously mentioned, private student loans don’t always have the same borrower protections as federal student loans. This is why they are generally considered an option after all other sources of funding have been evaluated.

If private student loans seem like an option for you, consider SoFi. Private student loans at SoFi have no hidden fees and the application process can be completed entirely online. Potential borrowers can find out if they pre-qualify, and at what rates, in just a few minutes.

SoFi makes the student loan process simple. Find your rates in just minutes.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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