Financial assistance is paramount when a student is pursuing their education. Apart from tuition fees, things like books, extracurriculars and social life are also part of the expenditure. Loans can go only so far and don’t assist with all of a student’s necessities. However, a professional student’s line of credit has benefits when looking out for financial assistance. Therefore the blog below gives a good understanding of the same.
What Is A Student Line Of Credit?
Simply put a line of credit funds with a pre-set limit which the student can keep borrowing as long as they pay the borrowed amount back. A line of credit can vary based on many factors but can range from $5000 to $80,000 and more. This fund is very essential to a student pursuing their studies since this money can help in the payment of tuition fees, books, appliances and other daily expenditures. Moreover, if a student borrows $10,000 as a line of credit, then the student can keep utilizing the $10,000, the caveat being timely repayment of the borrowed amount should be done. Another benefit of an education line of credit is that one would have to pay an interest fee only on the borrowed amount and not the initial amount offered.
Applying for a student line of credit is a very straightforward process which is offered by most banks and credit unions. The financial institution would first assess your portfolio based on the documents provided. There should be a guardian or parent present to co-sign the application so that they can pay the amount in case you fail to. A line of credit can only be availed if the student is studying in a college and university and this proof is mandatory. Finally, the institute would declare an amount depending on the duration of the course, credit history, background status, etc and provide the credit similarly.
The Repayment Process
Just like money lent from any financial institute the borrower will have to return said money one way or the other. Once a certain amount is announced as funds with a student line of credit, the borrower would only have to pay the interest amount while in college or university. The creditors also allow payment of only interest up to a duration of 6 to 12 months post graduation, after which the entire borrowed amount along with interest needs to be repaid. Timely repayment of these funds is important since it affects your credit score in the long run.
A Line Of Credit Vs Student Loans
The most popular methods that students opt for when requiring financial assistance are loans and credit lines. A student must identify the pros and cons before opting for either one.
|Student Line Of Credit|
|Pros With a credit line the borrower can recycle from the issued amount if the borrowed amount is repaid. Eg: If $2,000 was borrowed and repaid from a total of $10,000, the same $2,000 can be used again.|
The student can borrow only the required amount and interest will be charged just on that amount.
With a line of credit the student can use the funds to purchase any essentials they require.
|Cons The interest rates are comparatively higher than traditional loans. |
The student has to repay the interest amount during college tenure.
|Pros The student does not need to repay the principal or interest amount during their college tenure.|
Lower interest rates with a chance of getting it paid off by the government through Debt Repayment Assistance.
|Cons Loans are offered for specific purchases and proof of that must be shown eg: house, vehicle, etc.A fixed lump sum amount is issued towards the borrower and only this amount can be utilized. The student has to pay interest for the entire amount loaned out.|
1. What are the benefits of having a line of credit?
With a student line of credit the student has the flexibility to use the funds whenever they please. You can also reuse paid credit which is not possible with regular loans.
2. Is there a student line of credit interest rate?
Different banks have different interest rates for a line of credit. Some are based on criteria like duration of the course, type, of course, employment status etc. Others are just the prime rate with some additional percentages.
3. Is there an eligibility criterion to avail line of credit?
The few general criteria are; being enrolled in a university or college, being of legal age, either a Canadian resident or a permanent resident.
4. What is the process to get a line of credit?
A line of credits for students are offered at banks or credit unions and therefore these are the perfect place to acquire one. A brief eligibility check can determine your chances to receive the student line of credit.
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