Cost of living loans are special types of lending arrangements that provide individuals with the ability to secure funds that are used to meet basic living expenses for a period of time. The idea behind this type of loan is that the repayment of the loan balance can be deferred for a period of time, in anticipation of the financial circumstances of the borrower improving at a later date. There are several different types of cost of living loans in common use today, with most of them having to do with providing help with living expenses while the borrower is seeking an education or undergoing some sort of intensive training related to a career.
One of the more common examples of cost of living loans has to do with aiding students who are in college. A student cost of living loan helps to address expenses that are normally not covered by scholarships or grants, such as the rent on a place to live and money for food and other basic living needs. With this type of loan, payments on the loan balance do not usually commence until the student has either dropped out of college or has successfully completed the coursework required to obtain the degree. At that point, the lender will usually expect payments on the balance to commence within a defined period of time after the departure from school, often within six months to a year.
Cost of living loans may also be provided to professionals who need assistance in meeting day-to-day living expenses while engaged in furthering training in their career of choice. A good example would be a nursing cost of living loan. With this type of financial assistance, the recipient of the loan would be free to pursue the training, and obtain the certification or degree involved, then begin to make payments on the loan balance once he or she has secured gainful employment. This type of loan can be used in conjunction with other loans and grants that aid in covering the expenses of attending a nursing school or program, making it easier to avoid attempting to work while dealing with the sometimes rigorous course of study.
While cost of living loans can be very helpful, they can be very expensive. Many lenders who extend this type of loan do not defer any interest, even while the borrower is still in school. This means that the entire time the student is focused on coursework and obtaining a degree, the loan balance is accruing interest. Care should be taken to understand all the terms and conditions related to the loan before making a commitment, including understanding the rate of interest and how it is applied to the amount borrowed.
