Another option for paying for post-secondary education is to take out private loans – that is, loans from a non-government source.
Why would I take out loans from a private source?
There are two main reasons to take out loans from a private source:
- You don’t receive a government student loan large enough to cover all of your costs. Even if the government agrees to lend you money (at both a federal and a provincial level), there’s no guarantee it’ll be enough to cover all of your costs. If you don’t get enough government loans to cover everything and don’t have any other resources (e.g. an RESP or savings), you may have to get private loans to cover the difference.
- You don’t qualify for government student loans. Since the government considers things like your income or your parent’s income, they may disqualify you from receiving a loan even if you don’t actually have the resources to pay for school. In this case, private loans may be your only option.
What’s a student line of credit?
When you have a line of credit, you can borrow money from it repeatedly up to a pre-set limit. So if your line of credit limit is $10,000, you can borrow $3,000, pay it back, and then borrow up to $10,000 again.
Student lines of credit are specifically designed for people seeking post-secondary education. A student can use their line of credit to cover various expenses, including tuition, books, food, and transportation.
With a student line of credit, you only pay interest on the amount of money you withdraw. Keep in mind that the interest rate on a student line of credit may be lower than the rate offered on government student loans. However, you have to pay interest as soon as you borrow money with a student line of credit, whereas with a government student loan, you don’t have to start paying interest until you finish your program or leave school.
When you apply for a student line of credit, you may need someone, such as a parent, to co-sign your application.
What’s a personal loan?
A personal loan can be used for various reasons – to pay for a car, a vacation, and school. They are offered by most banks and credit unions, and online lenders.
It’s best to get a secured personal loan (secured by your assets or those of your parents) as they come with a lower interest rate than an unsecured loan.
You have to pay back the amount you borrowed on a fixed schedule with a personal loan. And, of course, you’ll have to pay back both the principal and any interest the lender charges.
The Takeaway
If you don’t qualify for government student loans, don’t despair – you can still find ways to pay for post-secondary education! But it’s essential to be clear on when and how you’ll have to pay back your loan or line of credit to make the best funding choice for you.
