If the cost of attending college is stretching your wallet - and if it isn’t, please tell us your secret - then you may have considered taking out a private student loans. What exactly is a private student loan?
Unlike federal student loans, which are funded and insured by the federal government - private student loans are financed by banks and private lenders. Federal loans tend to have better conditions than private loans, as well as lower credit requirements. In addition, the repayment terms have a tendency to be less forgiving with private loans and you may need a cosigner. In a sense, private student loans more closely resemble personal loans than federal student loans and are often there to fill in the gap for school costs that are not eligible for federal loans.
When considering a private student loan you’ll want to look at a lot of the same parameters that you would when searching for a personal loan.
Check if the loan includes a fixed or variable interest rate, and if it makes more sense to you financially to take out a longer loan term with higher interest rates, or a shorter term with lower interest but higher monthly payments.
Private student loans can be less forgiving than federal loans, They may not allow you to postpone repayment until after you graduate or allow you to halt your repayment schedule if you become unemployed.
Look at your monthly budget and determine how much you write off each month towards paying off the loan, and if you run the risk of defaulting. Determine for yourself if it makes more sense to take out a loan that requires only interest-only payments while you’re in school, if you’d rather make full monthly payments right away, or if you’d rather be able to defer your payments until after graduation
Also make sure to check what type of fees the company charges for the loan, and what type of customer service options are available.
One of your first steps when applying for any loan should be to take a look at your credit score to see what type of shape it is in. Private student loans typically require a higher credit score, so if yours is fairly low or you don’t have much credit history, then you may need to find a cosigner for your loan. Look for someone in your family who has a good credit history, which should help you when applying for the loan.
You’ll also need to get a good amount of paperwork together for the application, including identification like:
Your social security number
your date of birth, address and identifying details
Proof of assets
Monthly rent or mortgage receipts
Any other information that lays out your financial status.
You will also need to fill out the Private Education Loan Applicant Self-Certification form, which is provided by your school and will show the lender exactly what costs you face for your education.
Try to get an idea of how much money you want to borrow as well. Do you want just enough to pay for tuition or would you also like some funding to pay for housing and other essentials? This will make a big difference in the size of the loan.
Finally, you will need to fill out a formal application for your private student loan with the lender of your choice, here are a few to look at:
Loan amount: $1,000 to full cost of tuition
APR: 1.24%-13.19% (with autopay)*
Loan term: 5-20 years
Minimum credit score: None; cosigners are accepted
Credible is an online marketplace that lets you compare pre-qualified offers from a network of vetted lenders with strong reputations. Getting an offer shouldn’t take you more than a couple minutes on the user-friendly website.
The site is best for people with good credit, but even if your financial history is a bit spottier, you can get a cosigned loan through Credible. The site states that you’ll need to have a credit score of over 660 to get a loan with good rates without a cosigner.
Regardless of whether you get a loan on your own or through a cosigner with good credit, you won’t be charged any origination or service fees by credible, which will also allow you to pay off your loan ahead of time without any prepayment penalties.
Loan amount: $1,000 up to full cost of degree
Loan term: 10-15 years
Minimum credit score: 640
College Ave is an excellent choice for anyone who has a solid credit score or a reliable cosigner. They offer loans and refinancing to both undergraduate and grad-school students, as well as parent loans for those looking to help their kids get through college.
College Ave offers a range of flexible lending and repayment options, allowing customers to choose the plan best suited for their path. It takes just 3 minutes to apply, and they also offer a stack of free tools and resources to help calculate the cost of your loan.
Loan amount: $2,000-$200,000 or total attendance costs for 1 year
Loan term: 5-15 years
Minimum credit score: 600 with cosigner; 680 alone with 2+ years of credit history; none if applying alone without 2 years of credit history
Ascent’s flexible terms make it an ideal choice for students who wish to extend their schooling, pursue an internship, or consider their options before joining the workforce. Various deferment and forbearance options make it an attractive choice, allowing students room to breathe while they chart out their education or career paths.
Ascent accepts applications with and without cosigners, and rewards those who make full consecutive payments with the option to release their cosigners. It also offers flexible payments with a grace period of up to 60 months for those joining the military or going into medical residency.
If you’re struggling to pay for college you are by no means alone. While federal student loans are the most popular option for those looking to fund higher education, private student loans offer a number of options that can fund your education if you’ve already maxed out your federal loan limits or are applying to a school that doesn’t qualify for federal loans. Take a look at what you need and what your options are, and make the decision that’s best for your future.