Can a Personal Loan Help You Pay off Student Loans?

You may find that you are unable to pay the student loans you have taken out for your child. If this happens, you may have a lot of questions. One of the biggest questions involves using a private personal loan to cover the costs of a student loan you are struggling to pay off.

Fortunately, there are a few things you can do. Getting a personal loan may be one of those steps you take.

Refinance the Loan with a Private Lender 

If your child is able and willing to pay the loan, you can have them refinance the loan in their own names, which you need to do through a private lender. Keep in mind that this option may only be available if your child has good credit and enough income to cover these costs.

If you are unable to get a private lender through your child, you may be able to get a personal loan through a private lender based on your own credit score.

Consolidate Other Debt

Perhaps you don't plan to get a personal loan to cover your child's student loans, but you might consider consolidating other debt with a personal loan. Consolidating this other debt with a personal loan gives you more freedom to catch up on those student loans.

Choose a Different Repayment Plan

There are several different repayment plans you can choose from for your parent student loan. Some may be helpful for you to consider.

For example, you might consider an income-contingent repayment loan, which means you spend just a percentage of discretionary income on your loans. This gives you up to 25 years to pay back your loan. You might also choose an extended repayment plan, which gives you more time to pay off your loan and stretches your payments out over a longer period of time. Graduated repayments allow you to begin with low payments and increase the payment amount steadily over time.

Of course, you may find that a personal loan is the better option based on its payment plan. Take a look at the interest rates for each before you decide.

What Happens If You Default?

If you default on your loans, it means your wages could be garnished and your income tax may be seized. It is important that you keep up with your student loans, even if that means securing a personal loan. Consult with a finance professional to discuss personal loan options.