Pursuing your education goals can be a significant investment in your future, but it’s no secret that education expenses could be costly. Sometimes government funding, grants, scholarships and loans – such as HELP – provide support, although they may not cover all of your expenses.

Understanding personal loans as a financing option for costs such as textbooks, tuition or technology could help let you focus on the important stuff – your education.

• What is a personal loan for education?
• Types of personal loans for education
• Eligibility criteria for personal loans for education
• How to apply for an unsecured personal loan for education
• Costs and fees associated with a personal loan
• Repayment options and strategies
• Why use a personal loan for education?
• Tips for responsible borrowing

What is a personal loan for education?

The Australian Government provides loans for eligible students enrolled at an approved higher education provider. The Higher Education Loan Program (HELP) debt needs to be paid back through the tax system once you start earning above a certain threshold, and is also indexed every year based on the Consumer Price Index (CPI).

On the other hand, a personal loan for education is a loan provided by banks or financial institutions and is designed to cover education expenses that may not be covered by HELP. A personal loan for education could cover a wide range of expenses, including tuition fees, textbooks, technology, accommodation or living expenses.

Types of personal loans for education

A personal loan for education is an unsecured loan. An unsecured loan doesn’t need to be backed by an asset like a secured loan does. A secured personal loan may be more suitable when you're borrowing money to buy a car, as you could use the car as security.

It’s possible to design a personal loan so it suits you. For example, fixed interest rates could provide predictable monthly repayments, while flexible repayment terms may suit your financial situation. Some educational expenses paid with a personal loan may also be tax-deductible, so it’s worth doing your research.

If you choose a fixed interest rate, your repayments will stay the same for the term of the loan, which may help you plan and budget with greater certainty. If you choose a variable loan, your interest rate may fluctuate with market conditions.

Some variable loans, like the Westpac Flexi Loan, offer a continuous line of credit. This means you can choose to withdraw as much as you need, whenever you need it, and you only pay interest on that amount, rather than taking out the entire balance in one lump sum and paying interest on the full amount.

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Eligibility criteria for personal loans for education

When applying for a personal loan, you’ll be assessed on your ability to repay the loan. The lender will look at your credit history – so ensure you’re meeting any current repayment obligations. You can check your credit history for free at creditsmart.org.au by following the links to a free credit report.

You’ll also need to be over 18, be an Australian or New Zealand citizen or hold an acceptable visa, have a fixed residential address in Australia, and a regular, verifiable Australian taxable income.

How to apply for an unsecured personal loan for education

After doing your research and comparing loan options, it’s time to apply. Whether you’re an existing or a new Westpac customer, you can apply online, at your nearest branch, or over the phone.

You may be required to provide documents, including your proof of identity, proof of income, your regular monthly expenses, and any current debts in your name (such as a home loan, personal loans, credit or store cards and instalment purchases like Afterpay and Zip Pay).

If you meet all the criteria and your loan is approved, you’ll receive your contract via email. Customers with an existing Westpac transaction account can access funds within an hour after signing the loan contract if an existing Westpac account is nominated. Other nominated accounts can take up to 3 days to receive the funds^[#].

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Costs and fees associated with a personal loan

It’s important to understand any costs and fees associated with a personal loan for education. These may include establishment fees, early repayment fees and missed payment fees, so be sure to read all the details of your contract.

With a Westpac personal loan, you can make extra repayments without any fees. However, you may need to pay an early prepayment fee if you choose to pay your loan off in full before the loan term ends.

A difference in costs over the loan term may also be whether you choose a fixed or variable interest rate, and whether interest rates increase or decrease over time. It may be beneficial to maintain a strong credit score to potentially secure a lower interest rate when you apply.

Westpac’s personal loan borrowing power calculator can help assess how much you might be able to borrow, while the repayment calculator can help you estimate how much your repayments may be on fixed rate loans before you apply.

Repayment options and strategies

To help manage budgeting for loan repayments, you can choose a personal loan term that fits your budget with fixed rate loans. You could also structure the loan to align with your pay day, whether that means making weekly, fortnightly or monthly repayments.

If you have the opportunity, you may want to consider making extra payments to reduce interest over the loan term. Plus, you can choose to set up automatic repayments for the life of the loan, so you have a set repayment schedule and don’t need to think about making your repayment every time it is due.

Why use a personal loan for education?

A personal loan for education may provide more flexibility compared to a government loan, in how the loan is used. For instance, it could cover a wide range of educational expenses, including accommodation, technology and textbooks, not just tuition. It also may be possible to gain faster access to necessary funds, so that you can focus on your studies.

Tips for responsible borrowing

Before applying for a personal loan for education, here are some tips you may want to consider to help make sure that you’re borrowing responsibly:

• Have a clear plan for how you’ll manage repayments
• Understand the loan terms and conditions before accepting the loan contract
• Borrow only what you need

To sum up

Whether you’re changing careers, returning to work, wanting to complete a short course or maybe complete a Master’s degree or achieve a PhD, a personal loan may help you finance your ambitions. Investing in your education now may have the potential to lead to benefits in the future.

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