Getting a degree requires a lot of funding. In most cases, students access federal loans or private student loans to cover their expenses. However, others who already exploited these options or cannot qualify also wonder if personal loans can be a good alternative. Personal loans like those distributed in USAA serve versatile purposes – to afford home remodeling, bills, medical expenses, etc. If you consider the USAA personal loan for educational costs, you are in the right place.
This guide will discuss the USAA personal loans and evaluate them as an alternative for student loans. We will also present other solutions to fund your education.
USAA provides banking, insurance, investing, and consultation services to eligible individuals. The company has its network of members, and it is necessary to be a USAA member to enjoy the offered programs. Only the current and former military members, together with their children and spouses, can become members. In more details, those people are eligible to get membership:
- Active Duty, Guard or Reserves in Air Force, Army, Coast Guard, Marine, Navy, National Guard, and Reserves of the U.S
- Veterans – former military members with Honorable discharge
- Family members- spouse, widow, widower, etc.
- Cadets and Midshipmen
You can get more information about eligibility on the official website of USAA. After getting a membership, individuals can access multiple service opportunities, including a USAA personal loan. Besides, keep in mind that membership is free. It is also possible to transfer the existing accounts to USAA once the individual becomes a member.
USAA Personal Loan
USAA provides personal loans to people in need of urgent cash. The company aims to help individuals who face unexpected expenses and need to access a fund source with low interest.
The USAA personal loan claims to be a better alternative to high-interest credit card cash advances. The lender offers flexible personal loans. Whether you need money to cover house upgrades or medical expenses, you can get money quickly. Besides, USAA personal loans do not require an application or early repayment fees.
As mentioned before, the company offers flexible terms. Hence, borrowers can easily choose their repayment periods among several options- between one to seven-year periods. The minimum limit for a USAA personal loan is $2,500, while the maximum amount is $20,000.
Yet, the minimum limit changes based on your desirable repayment period. $2,500 is only accessible if you agree to repay the money in one to three year period. In case a borrower wants a four-year term loan, the minimum limit increases to $5,000. This amount is $10,000 and $15,000 for a 5-year and 6-year repayment plan, respectively.
Lastly, if you wish to repay the debt in seven years, you need to borrow the maximum amount- $20,000.
Additionally, keep in mind that borrowers in need of a five or more year repayment plan will face a thorough credit check. Hence, they need to have better credit performance than people who choose shorter terms.
The loan interest rate or Annual Percentage Rate (APR) of USAA personal loan depends on the desired repayment period, the amount, etc. Besides, there exists an auto-pay discount.
For example, if you need $2,500 and choose a one-year repayment period with the auto-pay feature, your rate will be around 7.24% (based on the USAA loan calculator). In such a case, the monthly payment amount will be around $216, and the total cost of the loan will be approximately $2,600. If you wonder about the personal loan rates, you can use the loan calculator on the official website.
However, keep in mind that the calculator gives preliminary results. It means you might face different APR, total cost, or monthly loan payments when you get a USAA personal loan. The calculator only aims to help you identify if you can afford the loans.
Application to a USAA Personal Loan
Another advantage of USAA loans is that it takes a little time to apply. It is possible to apply online, which will take a few minutes. When the applicant gets approval, he/she will also be informed about the interest rate. If you agree with the conditions, you can receive the money within one working day to your bank account.
Disadvantages of USAA loans
You can get a USAA personal loan for many purposes- to pay the bills or remodel your house. Unfortunately, the downside of this personal loan is that you cannot use the money for higher education expenses. The USAA explicitly disallows using the loan to cover such expenses and suggests getting student loans for this purpose. Besides, this loan cannot be used for loan consolidation purposes.
So, for student loan borrowers, this loan only helps to save money from other expense areas. For example, you can get the USAA personal loan to pay your house upgrade costs and use the savings from this area to repay your student loan debt. If you are dissatisfied with such an option, keep reading about your alternative options.
Personal Loans vs. Student Loans
As mentioned, USAA does not allow getting personal loans to cover education expenses. However, it is still beneficial for students to understand the difference between personal loans and student loans.
These two loan types have some similarities. For example, they both can require a credit check. Their rates will depend on the credit performance and desirable repayment options. Yet, there also exist some major differences.
A USAA personal loan, similar to many other personal loans from different lenders, allows using the money for versatile purposes. However, some lenders, including USAA, do not allow borrowers to spend the lent money for educational expenses.
On the other hand, student loans aim to help borrowers specifically to afford higher education. Hence, it is possible to use the money for tuition fees, expenses for books, supplies, transport, etc. However, this time, student loans are not allowed to be used for vacations, home repairs, bills, etc.
Therefore, borrowers need to first decide why they need the money and choose a personal or student loan accordingly.
Previously we mentioned that the USAA personal loan could be repaid in a maximum of seven years if you get the highest amount- $20,000. Many personal loan lenders offer a similar duration for repayment.
However, student loans are usually more flexible because they provide longer repayment periods. In most cases, student loans will be repaid in 15 to 20 years. Besides, with student loans, you get different repayment options. For example, borrowers can defer student loan payments while they study or pay only interest during the in-school period.
Student loans, specifically federal loans, can bring many tax benefits. For example, it can be possible to get up to $2,500 tax deduction for student loans. In this way, borrowers can save money. However, such opportunities do not exist for personal loans.
Can I Use Personal Loans for Student Debt?
In some cases, if lenders allow, it is possible to use funding from personal loans to cover student loan payments. However, such a strategy is not advisable. The rates of personal loans are usually higher than student loans. Hence, you will get more expensive funding to cover cheaper student loan repayment. As a result, when it comes to repaying the personal loan, you will lose a lot of money. In short, such a method is not a financially feasible option.
If you cannot afford the monthly payments of student loans, it is a much better strategy to contact the lender or loan servicer. They can advise you on how to lower the monthly payments. For instance, federal loan borrowers can change their repayment plans.
By moving to Income-driven plans, they will get interest rates adjusted to their income levels. As a result, borrowers with low income can afford the low debt repayment amounts. Meanwhile, private lenders can grant temporary forbearance periods if the borrower faces financial struggles.
Federal Student Loans
Before you think about personal loans, you need to check the eligibility for federal loans as it is a better alternative. The government makes it easy for borrowers to get a degree by providing affordable student loans. However, before you opt for one, you need to understand the obligation and responsibilities it will bring.
In general, a loan is a source of funding that you need to repay together with an additional interest rate. Usually, the interest for federal student loans is lower than loans provided by private lenders.
Federal Loan Types
There exist different federal loans. First, Direct Subsidized debt is available to undergraduate students in financial challenges to afford educational costs. Meanwhile, Unsubsidized loans are accessible to wider categories- undergraduate, graduate, and professional students. Although financial needs play a massive role in Subsidized loans, it does not affect the eligibility for Unsubsidized loans much.
Another federal student loan type is Direct PLUS. Only graduate and professional students, as well as parents of undergraduate students, qualify for this funding source. Similar to Unsubsidized loans, these loans do not require proving extreme financial need. However, it will involve a credit check. Hence, applicants need to have a good credit performance. Otherwise, there will be compensatory requirements.
Lastly, consolidation loans exist to combine existing loans into one. In this way, the repayment becomes easier as the borrower deals with a single loan and loan servicer.
The upper limit for undergraduate borrowers is $12,500 per year and $20,500 for graduate and professional students. However, the exact amount will depend on how much you need and your eligibility requirements. For PLUS loans, the loan amount varies based on the real college costs.
Advantages of Federal Loans
When we say that a federal loan is better than a USAA personal loan for education purposes, we mean it. There exist many conditions which make federal loans more attractive.
First, as mentioned, federal loans are usually more affordable- lower than many private loans and credit card debt. Second, the borrowers are mostly not required to have a good credit standing because it does not make sense to check the credit performance of students as they do not have a credit history. Additionally, federal student loan borrowers do not start repaying the debt until six months after graduation. In other words, borrowers can defer the payments while they are studying.
Another benefit of federal loans is that repayment is much more flexible. There exist different repayment options- Standard, Graduated, Extended or Income-based plans. The borrowers can choose the plan that fits their financial standing the most.
Consider These before Taking Loans
Whether you think about USAA personal loans, federal loans, or private student debt, there are some points you should consider first. You need to be a responsible borrower to avoid future problems.
For example, when borrowing money, consider how much you need and how much you can afford. Sure, it is not desirable to get money that you cannot repay in the future. Besides, receiving more funds than you need will only be more expensive to return.
If you are a student, it is advisable to check how much is the starting salary for your desired position. In this way, you can roughly estimate your capability to afford the repayment plan, although three is no guarantee that you will find a job after graduation.
Before you sign any document, read it several times and understand all terms. If you need, ask for clarification. Additionally, keep all documents related to the loan from the beginning. In this case, if a problem occurs in the future, you can prove your arguments with reliable evidence.
Need Help? Contact Us
Many students do not have the financial background to understand and analyze their debt strategies. It is hard to compare loan types, whether it is a federal loan or USAA personal loan, without knowing the exact meaning and consequences of loan terms. If you want to avoid making mistakes and choose the best alternative to fund your education, you can contact our debt specialists. Student Loans Resolved experts will collect information about your current finances and suggest a suitable solution. Besides, we will guide you throughout the whole process and be on your side whenever you need us.