Saturday, July 24, 2010

Question regarding student loans vs personal loans

DogsBody said...


Hi there,

I am planning to undertake Post Graduate study overseas and as such I don't qualify for a student loan. The course is run in eight modules over two years, and you can pay in two instalments every year, one in October and one in January. My question is, if I am going to take out a personal loan to cover the tuition fees, is it better to get this in one lump sum (about $NZ20 grand) or get four smaller personal loans over the two years? I just figure if I take the lump sum I'll be paying interest from day one, even though I don't actually need all the money right away. My other question is, is it sometimes better to use a low interest credit card for such things? From what I have seen, the interest rates are lower on some credit cards than for personal loans.



Much obliged,

Poor Student

1 comment:

WebTaxOfficeUSA said...

Dear reader
We are happy to have you on our blog. Here are recommendations to your questions
1) You asked: is it better to get this in one lump sum (about $NZ20 grand) or get four smaller personal loans over the two years?

You should remember that the interest starts to accrue since the time you took out the loan. So, in your case if you are to take out the lum sum loan amount, you would be paying interest on monies that you can avoid. This does not make a financial sense unless you have other needs for this money.

2) You asked: is it sometimes better to use a low interest credit card for such things?

Sometimes it makes more sense to tap into low interest credit cards. However, you need to bear in mind that you will pay a higher interest rate once the offer expires.
For Example: You may get a credit card with terms saying 2.99% APR until Aug 1st 2012. Here in this example you may be paying low interest rate until July 2012, after that your interest rate will go up to the norm which is usually 22%. Second factor which should influence your decision is that until July 2012, you will be working towards getting your masters degree and most likely you will be earning just enough to make your ends meet. Therefore, having to make a credit card payment will put an extra burden on you.

Evaluate your scenarios prior to making a decision. If you have any additional questions or need more clarification on this post, feel free to post your questions.

Good luck,
Web Tax Office Team
http://webtaxoffice.com