Private student loans tend to be our very last option once we’ve exhausted federal student loans.
Unfortunately, the buy-now-pay-later mentality drives us to jump right into available resources. By doing so, students grab on to what’s easy to access without taking a deeper look into the details.
Based on research and personal experience, this relevant info should help you before you apply for private student loans!
Private Student Loans: Be In The Know
It is practically in most student’s objective to get an education to potentially secure a better future. Ironically, the cost of education with the burden of student loans could be very well our demise. Yet education is still the key to counter this irksome system. By arming yourself with the knowledge of how this process works, you can either get away or know your way around it.
Although I’m fortunate to be able to juggle my finances pretty well now, I still look back and wish I had done things differently. I could have saved myself from paying all these loans with staggering interests and perhaps take a dream vacation.
To help your future finances, learn all you can about private student loans below.
What Are Private Student Loans?
Private student loans are similar to a mortgage or car loan–heavily advertised and readily available.
Private student loans are a supplementary financial option for college students. As a rule, private student loans cannot replace federal loans and are generally accessed once students have maxed out federal loans.
Federal and private student loans are both financing options, but they’re totally different. Private student loans are certainly the tougher pill to swallow with interest rates going as high as the loan itself.
Private student loan volume grows as the federal student loan limits remain the same. Although this issue has been addressed back in 2008 and temporarily decreased private student loan volume, it is expected to rise again. So it is important to educate yourself and use tools to compare different student loans.
What You Need To Know Before Considering Private Student Loans
Unlike federal student loans, private student loans do not give the same forbearance and deferment options. Private loans dictate that when the time comes to pay up, there are no ifs, ands, or buts, just send that money! Lenders will give you rainbows and roses during application, but they may give you hell once the time for repayment comes.
It’s no secret that the interest rates on private student loans can double the loan amount over time. With that in mind, it’s important to know that it doesn’t matter how low the interest rate lenders advertise, they’ll take back as much as they can.
Lenders will always take precaution and will look into your credit worthiness. Since a student has no credit history to look into yet, it is often the cosigner that’s required–which is usually a relative. Remember that your cosigner holds as much responsibility for the loan as you do.
Before you even consider a private student loan, make sure that it’s the last resort. File for an FAFSA (free application for federal student aid) first and every year, even if you didn’t qualify the first year. You may qualify for a grant, work-study program, and other forms of student aid.
Comparing Private Student Loans
Lenders rarely dish out complete details of the loan terms. This is partly to avoid you from comparing them with other lenders. Luckily, tools to compare student loan lenders are available online. You can also check it based on the following key information:
- Interest Rate – Lenders offers fixed and variable interest rates. A fixed rate would be preferable, but make sure the terms are better than the variable rates.
- Payment Options – Lenders may offer loans where you can start repayment of interest while you’re enrolled or you can start after you graduate.
- Incentives –Lenders may offer better terms for borrowers with excellent payment records.
- Origination Fees – Some lenders charge origination fees but most of the competitive ones don’t.
Tips For Paying Off Your Private Student Loans
Indeed, students loans are a cloud looming over almost every college graduate–it’s understandable to want to pay off the debt soon. However, there is no clear benefit of paying off those student debts aggressively.
Speaking from personal experience, there’s no need to rush in paying up these loans. What you need to do is get a life insurance to protect yourself and your cosigner from fortuitous events.
Remember, lenders will not forgive your debt even if you die, leaving your cosigner in big trouble. If you’ve got the money, invest in something else like a home.
Check out this video before you apply for a private student loan:
If you’re already stuck with student loans, you may want to look into the benefits of consolidation.