You can get a student loan with bad credit. Unlike personal loans, student loans don’t take your credit history into account. That’s because student loans work differently from other types of borrowing. The government-backed Student Loans Company provides loans to cover university or college tuition fees and help with the cost of living. The terms of these loans will vary depending on the academic year the student studied, course fees, as well as a student’s financial circumstances.
Can a student get a personal loan?
Yes, it is possible for students over the age of 18 to apply for a personal loan in the UK. However, options for students tend to be limited. While each lender has its own eligibility criteria, students may be considered high-risk borrowers especially if they are unemployed or have a limited credit history.
Without a regular income, a student may find it difficult to keep up with the loan repayments. Similarly, a limited credit history may imply that you have less experience with borrowing and have no record of how you manage repayments.
» MORE: What to do if you have no credit history
Other ways of borrowing money as a student
Some lenders offer borrowing options specifically designed for students, these include student overdrafts and student credit cards. However, these facilities are usually subject to specific lending criteria, so they may not be available to those with bad credit.
Student overdrafts
Most student bank accounts offer an interest-free, arranged overdraft. While student overdrafts vary between banks, most typically offer up to £3,000. You’ll have to repay the money in your student overdraft by a fixed date just before or after you graduate from your course. However, it’s important to note that you may be charged interest if you borrow more than your arranged overdraft.
Student credit cards
Some providers offer student credit cards, which are designed to help you to borrow money while also offering an opportunity to build up your credit rating through managing repayments. Typically, student credit cards will have a lower credit limit to avoid borrowers getting into too much debt.
It’s really important to pay off your student credit card in full and on time each month.
Clearing the balance in full means you will avoid paying interest and improve your credit score.
Missed or late student credit repayments will negatively affect your credit score and may damage your chances of borrowing in the future. Missed or late repayments are recorded in your credit file for six years.
» MORE: How do credit cards work?
What to do if you’re a student struggling with money
Managing your money as a student can be tricky, especially if it’s the first time you are financially independent. But there are several options available if you’re struggling to keep up with expenses:
- Scholarships and bursaries: Some UK universities offer means-tested scholarships and bursaries to help cover costs. These are lump sums of money that don’t have to be repaid. Some universities also offer academic scholarships and merit awards based on a student’s performance. It’s worth researching what awards are available at your university and speaking with the administrative team for more details on the application process.
- Hardship funds: Universities may offer hardship funds, which used to be referred to as the Access to Learning Funds, to help students struggling financially. Student applications are reviewed by the university and the amount of money offered varies depending on a student’s circumstances. Similarly to scholarships and bursaries, hardship funds do not have to be repaid.
- Emergency loans: If you are having serious financial difficulties and all other financial routes have been explored, some universities will offer interest-free, short-term emergency loans. The terms and conditions for university emergency loans vary between institutions so it’s important to research them before applying and if anything is unclear, get in touch with your university to find out more. As with all credit agreements, it’s really important to keep up with your repayments to avoid additional interest or charges or your details being passed on to a debt collection agency.
- Debt charities: Get in touch with a debt charity for free advice as soon as possible if you think you’ll have trouble repaying what you borrow. They can help to assess your financial situation and support you in deciding the best next steps to get your finances back on track.
- Family or close friends: Borrowing money from family or close friends may offer an easier – and generally cheaper – way of raising funds. But it’s important to make sure that you’ve worked out a budget to check whether you can afford to repay the loan. It’s also best to get an agreement in writing, outlining how much you’ve borrowed and when you plan to repay the loan to avoid any misunderstandings in the future.
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