Student Loan vs. Tax Refund Loan: Which Do You Need?

It may seem straightforward and simple: Get a student loan for your tuition and other school costs and get a tax refund for any other needs you have during tax filing time. But, the truth is that the way in which you can use loans is more complicated. You have more options than you realize, and a student loan is not always your best choice for covering the costs of education. Here are some pointers and information to help you make smarter, better choices about loans.

How and When You Can Use Tax Refund Loans

One of the most important things you need to know about a tax refund loan is that you are not restricted to using it during tax time. Most lenders who offer them make the loans available year-round. Another misconception is that you need to show proof that you do have a refund on the way. This isn’t necessary for getting approved. The major factor in getting approval for this kind of tax loan is having a job and regular paycheck. If you can afford the amount you’re borrowing, based on your income, you will likely get approved regardless of your tax status.

When You Can Use Student Loans

Student loans are very specific types of personal loans. They are for tuition and school costs for going to college. You can apply for federal student loans or private student loans. The latter may be more difficult to get approval for with your credit score being an important factor. Also, a private loan can be used for anything you want, while federal student loans are restricted. You can only use the cash for school-related expenses.

When a Student Loan Makes Sense

There are some serious issues with taking out a student loan. Many people graduate and then face years, or even decades of having that debt and struggling to repay it. If you don’t get the job you want right away or one that pays well, you can have a really hard time making repayment. You may even go into default or delinquency. On the other hand, if you are earning a four-year degree and will have a huge tuition bill, a loan like a tax refund loan probably won’t be enough to cover it. You’ll probably need a student loan.

When a Tax Refund Loan Makes Sense

If you have lower school expenses, for instance if you are going to a community college or are earning only a certificate or diploma rather than a degree, you may not need a big student loan. A tax refund loan is smaller and can help you cover that last bit of tuition you don’t have the cash for. It can also help you with additional expenses associated with going to school: books, lab fees, room and board, and other fees. Know when to blow the bank on a student loan and when it’s smarter to get this smaller, more affordable tax refund loan and you’ll be making the better financial decisions for your education.

Student Loan vs. Tax Refund Loan: Which Do You Need?