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Loan vs ISA

Loan vs. ISA: Finding the Financing Option That Works Best for You

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Not everyone can afford to pay for their education upfront — even when it comes to the relatively inexpensive career training programs, which can still cost thousands of dollars. So, if you’ve decided to build your skills and enroll in a training program, you may find yourself wondering what payment options you have, and which one is right for you. Two common options for those who need to break up tuition into smaller payments are student loans and income share agreements (ISAs) — but which one you choose will depend on your own unique situation and which terms you feel most comfortable with. Below, we outline the difference between the two and how either may work — along with a quiz to help you find the right payment method for you!

Loans

For those who would rather split up tuition into steady payment amounts, a student loan can be a good option. Depending on the products available for each program, Climb loans can include either full deferral, interest-only deferral, or immediate full repayment — as well as short-term, 0%-interest loans or longer-term loans which do include interest.

When deciding which loan product to use, it’s important to keep in mind both your financial situation and your goals. Can you afford higher monthly payments in order to pay less overall, or would you rather make lower monthly payments, even if it means paying more in interest? Will you need additional funding for living expenses? Answering these questions before proceeding will help make sure you’re making the right financial decision for you.

Fortunately, Climb only performs a hard credit pull once a loan is funded, so you can submit an application with no impact to your credit score! This way, you can check what your payments will look like without making any commitment.

There are two key things you’ll want to keep in mind before taking out a loan. Most loans come with an interest rate, so you’ll ultimately pay more than the tuition amount. And for private loans, your credit will also be pulled, so your credit score may be impacted. Remember, most private lenders pull credit upon application, but Climb only does a hard pull after the loan is funded, so you have the opportunity to apply with multiple co-borrowers to get the best rate.

Loan benefits

  • Payments are laid out over the course of the loan term, so you know exactly how much you’ll pay each month — no surprises.

Loan drawbacks

  • You will still owe payments if you don’t find work.

ISAs

Some programs also have the option of an income share agreement. With an ISA, you won’t have to make any tuition payments until you find a job, and in some cases are also earning above a minimum income threshold. Once you’ve reached the employment threshold, you’ll make payments based on a fixed percentage of your income, until you pay a maximum amount or number of payments.

You’ll want to keep in mind, though, that the amount you pay will increase as your income increases — so if you find a well-paying job, you may actually end up paying much more. It’s also important to note that ISAs are relatively new, which means they’re lesser-known and lesser-regulated. Because of this, they don’t have the same protective regulations that student loans come with.

ISA benefits

  • You’ll have for possible unemployment or underemployment — if you don’t get hired within a certain timeframe, you won’t pay.

ISA drawbacks

  • There is a potential for higher payments, and the total tuition paid once employed.

Which should I choose?

Asking questions is key when it comes to weighing your tuition payment options. Talk to your school’s administrators about what’s available for each program. Reach out to loan providers for their interest rates, fees, and length options. Research expected salaries for your prospective career to get an idea of what you might be making vs. what you might be paying. At the end of the day, the more you understand your goals, your current financial situation, and how the terms of each product will affect both, the better able you’ll be to make a sound decision for yourself.

Take our quiz to find out which payment option is best for you!

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