Technically, yes, you can use a payday loan to pay-off your college debt, however it is not advisable for various reasons.
College years are seen as the opportunity for young adults to find their own feet and become independent, however, independence is something that most youngsters aren’t really prepared for. As they say, freedom comes with responsibility and that becomes a very clear fact once you become a full-time student, and are actually paying for it.
Financial independence is one of the core aspects of student life. Being in a position where they have to learn to manage their finances for the first time, students often find themselves struggling to make ends meet. That is why young adults are the most common consumers of payday loans in the US, with over 50% of millennials having considered a payday loan.
- Whilst you can technically use a payday loan to pay-off student debt, it is preferable to instead wait until you are in a full-time job after college and pay-off your loan then.
- Regardless, young adults (18-24) are the most frequent borrowers of payday loans in the US.
- While payday loans seem appealing to students as a quick fix, they come at the cost of high interest and pressing repayment plans. Failure to meet these payments can damage your credit score, negatively impacting your financial future.
- More recently, President Biden has been pushing a student loan forgiveness program, in an attempt to relieve the younger generation from the pressures of student debt.
Should I Get a Payday Loan as a Student?
For students who cannot depend on their parents or guardians all the time, an effective solution can be found in the form of short-term loans.
Short-term loans can help pay for food, rent and a whole lot of other expenses that a student might find hard to payback on his or her own. Books, tutors and even vehicle emergencies can be covered with the help of a payday loan.
In some cases, students have also used their payday loan amount to pay off pending student loan debts, or to bridge the gap between when the student loan installments stop between semesters.
However, it is important to bear in mind that as a young person, it is not preferable to have debt building up and things that can negative impact your credit score from such a young age.
What If I Have No Credit History?
Direct lenders consider your income and financial status, as well as your credit score when deciding whether to offer you a loan. Even if you have poor or no credit, some lenders are willing to provide you with a payday loan.
However, it is important to remember that student payday loans are not a long-term financial solution. They should never be used to pay off other loans or spent frivolously on a shopping trip or a night out.
Indeed, if you have alternative means of securing money – namely through taking on a part-time job – you should avoid taking out a payday loan. They can damage your credit score, and come at a high cost, thanks to high interest. If you need one, you should consider it. If you don’t, you should consider healthier ways too begin your financial life.
What is a Student Payday Loan?
Payday loans are short-term loans designed to help borrowers in need of cash before their next payday. They are intended to be a short-term solution to a financial worry and not a way to deal with a long-term financial issue.
Payday loans can be a really useful tool if you incur some unexpected bills that need taking care of right away. These could be anything from medical bills to car repairs, or in the case of students, to cover your rent or textbooks.
Basically, any situation where you need to access funds quickly can be a reason for accessing a payday loan.
Am I Eligible for a Payday Loan as a Student?
The criteria may vary from lender-to-lender and whilst you might initially meet the basic criteria, some lenders might be more strict in terms of your minimum monthly income and also for those who are on welfare, self-employed and have not been employed for long than a few weeks or months.
However, it is important to note that if you do not meet this basic criteria, your loan application is likely to get declined early on. The basic criteria includes:
- You must be a legal US citizen.
- At least 18 years of age.
- Working full-time or part-time, with a regular income of at least $800 a month.
- You must have a valid current/checking account, for your loan to be paid into.
- You can’t have had a recent bankruptcy.
What are some Alternative Options to Payday Loans for Students?
A student payday loan may be appealing because it provides instant decisions and speedy access to funds, but other forms of credit may be available to you at a lower cost.
One popular way to earn some money as a student is through finding a job or side-hustle to do alongside your studies, such as work in hospitality (like a bar or restaurant), or perhaps doing some work on a freelance basis.
We also suggest looking at alternatives such as borrowing money from family or friends. Borrowing money from someone close to you may another option to help you out of your financial crisis. If your parents, other relative or friend is not in a position to help you, you should seek alternatives such as speaking to a debt charity or getting free advice from your college.