Back to school and personal loans: funding expenses without unbalancing your budget

The start of an academic year concentrates many expenses into a short period. Books, supplies, clothes, transport, a computer, accommodation and tuition can put pressure on a household budget, particularly when more than one student is involved.

A personal loan may be one option to assess for a necessary, planned expense, but it should not be the first step or an automatic response. Before borrowing, identify what is genuinely needed, which alternatives are available and whether the new instalment will remain affordable in the months ahead.

This guide provides a calm framework for preparing children for school, supporting a university student or investing in professional training in Portugal.

Start by finding the true cost

Before considering finance, prepare a complete list and divide costs into three groups:

Check what you already have, ask the school for the final list and avoid buying everything before requirements are clear. Reusing items, buying second-hand or phasing purchases can reduce the amount needed without affecting education.

Include less visible expenses such as meals away from home, travel, printing, software, deposits and moving into student accommodation. In higher education, recurring costs may have a greater impact than supplies bought in September.

Establish what the monthly budget can support

An exceptional expense does not disappear when converted into an instalment. It becomes part of monthly spending, potentially for several years.

Begin with a simple calculation:

Net monthly income
− essential expenditure
− loan payments and other commitments
− allowance for unexpected costs and saving
= available monthly headroom

Do not allocate all of that headroom to a new payment. Energy, food, health and transport costs can change. Keeping a buffer helps prevent an unexpected repair or fall in income from leading to further borrowing.

Include every existing commitment, such as car finance, cards and credit lines. You can obtain your credit liabilities report free of charge from Banco de Portugal's Central Credit Register to confirm the agreements and limits recorded in your name.

Which alternatives should you check first?

Depending on the expense, you may be able to:

• use savings without exhausting the emergency fund;
• spread purchases over the first months of the academic year;
• reuse equipment or buy a refurbished alternative;
• sell technology that is no longer used;
• compare prices and textbook reuse schemes;
• check scholarships, social support, benefits or education-provider plans;
• choose training with interest-free phased payments, after checking every condition.

“Interest-free” does not necessarily mean “cost-free”. Look for fees, insurance, administration charges or a different price from paying upfront.

When might assessing a personal loan make sense?

It may be reasonable to compare offers when an expense is necessary, significant and cannot be postponed without affecting education or work. A computer required by a course, specialist technical equipment or career-related training are possible examples.

Even then, every case requires individual assessment. Borrowing should only be considered if:

• the amount is limited to what is needed;
• the payment fits the budget with a safety margin;
• the term is proportionate to the useful life of the purchase;
• income is sufficiently predictable to meet the agreement;
• you have compared the total cost, not only the monthly payment;
• you understand the consequences of late payment or default.

Borrowing more “just in case” or adding non-priority purchases increases interest, taxes and charges. Setting a maximum budget first keeps the decision tied to its original purpose.

Match the repayment term to the purchase

A longer term tends to lower the monthly payment but will normally increase the overall cost. You may also still be paying after the item is no longer useful.

Financing notebooks, clothes or other consumables over several years is particularly risky: the costs return next academic year while the old agreement is still running. For a computer or durable equipment, compare the loan term with its expected useful life and warranty.

The objective is not the smallest possible instalment. Where borrowing is appropriate, it is to find a balance between an affordable payment and the shortest term the budget can safely support.

Comparing offers: APR, total amount payable and key documents

Do not choose solely by the nominal rate or monthly figure. Review at least:

APR

The annual percentage rate of charge (APR) expresses the cost of credit as an annual percentage. Under the applicable rules, it includes interest, fees, taxes, required insurance and other costs. It is the main reference for comparing offers with the same amount and term.

Total amount payable

The total amount payable by the consumer is the overall amount repaid: borrowed capital plus interest, fees, taxes, insurance and other included costs. It shows in euros what the credit may cost through to the end.

Standard European Consumer Credit Information

Before entering into the agreement, you should receive standardised pre-contract information, known in Portugal as the FIN. Use it to compare equivalent offers and check the rate, instalments, term, charges, security, consequences of default and early repayment terms.

Always compare the same amount and term. A proposal may show a smaller instalment simply because it runs for more months.

Illustrative example: a computer for studying

Imagine a household needs a €1,200 computer for a course. After considering a refurbished model and using €300 that is available without touching the emergency fund, €900 remains.

It receives two purely illustrative offers:

Offer B places less pressure on the monthly budget but lasts longer and costs €72 more overall. Offer A ends sooner but requires greater monthly headroom. A decision would still require checking the actual pre-contract information, APR and the household's financial capacity.

This example does not represent market conditions or a credit offer. It only demonstrates why term, payment and total cost should be considered together.

Personal loan, credit card or instalment plan?

Each option can have different costs and rules:

An available credit limit does not mean using it is right for the budget. Add up all current and future payments before combining payment methods.

The lender assesses creditworthiness

Before granting consumer credit, the lender must assess how likely the customer is to meet the agreement. It may consider age, employment, income, regular expenses and information held in credit liability databases, among other factors.

The customer must provide truthful, complete and up-to-date information. A positive assessment does not require the lender to grant credit, and a simulation is not an approval.

Carry out your own assessment too. The lender considers the risk of the contract; the family is better placed to anticipate health costs, rent, employment changes or support required throughout the academic year.

Five back-to-school mistakes to avoid

1. Financing purchases before receiving the final list

Buying early may result in unnecessary or unsuitable items.

2. Comparing only the instalment

A smaller payment may conceal a longer term and higher total cost.

3. Mixing essentials with impulse purchases

Separating priorities prevents borrowing and paying charges for optional items.

4. Using several instalment plans without adding them up

Small payments with different retailers can create a substantial monthly obligation.

5. Emptying the emergency fund to avoid all borrowing

Using every saving can leave a household exposed. Compare the cost of credit with the need to retain a reserve appropriate to your circumstances.

Frequently asked questions

Can I use a personal loan to pay tuition or training costs?

Loans are available for different purposes, including education. Availability, approval and terms depend on the lender and its creditworthiness assessment. Compare offers alongside any support or payment plan offered by the education provider.

Does a low instalment mean cheaper credit?

No. It may result from a longer term. Compare the APR, total amount payable, number of instalments and all other terms.

Is using a credit card preferable?

It depends on the repayment method and cost. If the balance is not repaid in full, interest may apply and debt may continue for longer. Check the card agreement and compare alternatives.

Can I repay a personal loan early?

Consumer credit can generally be repaid early, in full or in part, after giving notice. A charge may apply during a fixed-rate period within the legal limits. Check the rules and agreement that apply to your case.

How do I know whether the payment is affordable?

Add up every credit payment, deduct essential costs and stress-test the budget with an allowance for surprises. No single percentage guarantees approval or financial safety for every household.

Conclusion: plan before you finance

Back-to-school spending is predictable, but the amount can vary considerably. Taking inventory, distinguishing essentials from deferrable items, seeking support and preserving monthly headroom should come first.

Where a necessary expense remains, a personal loan may be an option to compare — not an obligation. The amount, term, APR, total payable and effect on the budget must be assessed together.

At DSIC Seixal Torre da Marinha, we assess your circumstances free of charge and help compare available market solutions, always subject to lenders' decisions. Contact us before deciding and look for an option suited to your financial capacity.

You can find more practical information in Tips & Resources.

Sources consulted

• Banco de Portugal — Rights and duties when taking out credit (Portuguese)
• Banco de Portugal — Interest rates on consumer credit (Portuguese)
• Banco de Portugal — Taking out consumer credit (Portuguese)
• Banco de Portugal — Creditworthiness assessment (Portuguese)
• Banco de Portugal — Central Credit Register (Portuguese)