Financing education often leaves the heads of adults in the clouds, asking, “Is using a personal loan the right choice for covering private school tuition?” A personal loan could serve as a lifesaver with multiple types of emergency expenses. However, we shall consider the viability of using such loans to pay private school fees.
For instance, if you want to incur some miscellaneous expenses related to your college education at a private institution, opting for personal loans with low interest rates may be reasonable. Some personal loans indeed come with cut-throat rates. However, the last alternative you want to try out is using credit card debt for education financing.
So, we can vaguely answer the question: “Is using a personal loan the right choice for covering private school tuition?” The answer is ‘yes’ and ‘no.’ For one, it largely depends on the circumstances, and if the lender’s repayment terms are mild, a personal loan may get you out of a precarious situation. Come along as we provide some more perspective on the subject.
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What Is a Personal Loan?
Personal loans are financial options that allow you to take out collateral-free funds and are often used for offsetting sundry expenses. Once an application for a personal loan has been vetted for loan eligibility requirements and approved, the borrower receives a lump sum of the money. Afterward, they repay the loan in fixed installments over a predetermined period. As mentioned earlier, one of the upsides of personal loans is that the interest rates are usually lower than credit cards.
Financial advisers usually advise borrowers with multiple debt categories to take out a personal loan to consolidate and eliminate all other debts. Regarding education financing, it is essential to read the terms of a personal loan. Some lenders place embargos on using their financial options to offset the cost of private schooling.
Alternative Funding Sources for Parents of Kids in K12 Schools
In some cases, the restriction rests on using personal loans for postsecondary private school tuition. So, if you are a parent with children in private K12 schools struggling with budgeting for education, here are some options to try out. Make sure to:
- Visit the school’s financial aid office to see if there are donor-based funds that could help augment your ward’s private school tuition.
- Find out if the school offers reduced tuition programs or staggered payment plans.
Exhaust the above possibilities for the education financing of your ward’s cost of private schooling before trying out other financial options. Hereafter, we shall consider alternative funding sources for the cost of private schooling.
Alternative Ways to Pay for Private School
We mentioned earlier that a personal loan should be the last-resort option for funding the cost of private schooling. Therefore, we will itemize alternative funding sources that parents and college students could use to augment their financing options.
1. Payment Plans
Even when the private school does not have a staggered fee plan, a parent can approach the appropriate administrators about it. Where available, these installment payment plans may be made available through a third-party company. So, endeavor to comb the terms and conditions before signing the agreement.
2. IRA or 401(k) Withdrawals
Parents saving to a 401(k) fund or having a personal retirement stash can decide to borrow some amount from it. This withdrawal will go to budgeting for education expenses and the cost of private schooling.
3. Home Equity Loan
A home equity loan is one of the high-risk alternative funding sources. It is risky because borrowers may lose their homes if they default on the repayment terms. Besides this bottleneck, a homeowner only needs to check all the boxes regarding loan eligibility requirements before proceeding with the application. Home equity loans made it to this list of finance option alternatives because they come at lower interest rates compared to personal loans.
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4. Scholarships and Grants
At the K12 and collegiate levels of education, various forms of scholarships and grants are available to be exploited. So, before applying for private student loans, college students can conduct some personal research on scholarships and grants specific to their major. Parents of K12 students can research on their wards’ behalf.
Is your response to our initial question: “Is using a personal loan the right choice for covering private school tuition?” still ‘Yes?’ Your financial situation might make a personal loan your last resort. We only advise that while budgeting for education funds, consider the loan eligibility requirements before applying for that personal loan. Also, make sure to shop around for the best loan deals.