For many young adults, college is their first big financial decision. What’s more, how much they borrow, and the accompanying interest rate could have a sustained affect on their lives. But unless they’re independently wealthy, most students will need help paying for classes and other related expenditures. So, you must find a student loan or two. That takes work. Here are the things to do when researching private student loans.
What are Private Student Loans?
Private student loans are non-government loans issued by a lender such as a bank, credit union, online lender, or other non-federal entity.
Who Can Get a Private Student Loan?
If you’re a student, you do need a good credit rating or have a co-signer handy who does. And either you or your co-signer – most undergrad students need one – need steady income. Don’t get caught flat-footed.
What Kind of Legwork Do I Need to Do?
Essentially, private student loans are meant to cover what financial aid and your government loans don’t. Here are some things to consider when researching private student loans:
- Low interest rate. Know that, in general, private student loans, for the most part, require a co-signer, which usually has the added benefit of nabbing you a lower interest rate. And if you have multiple loans, your rates will help you know which student loans to pay off first.
- Is a co-signer release possible? Find out whether your lender will let your co-signer off the hook once you’ve made several timely payments. Your co-signer will surely appreciate it.
- What about hardships? If you lose your job during repayment, or something else befalls you, what will the lender do, if anything, about the hardship? You need to know before something happens.
- What are the fees? This is another thing you need to know. You need to discover and compare how much it’ll cost you to borrow. Such fees are usually financed but note that they do add to your principal.
- Know how much you need. Because that’s how much you should borrow, no more, no less. Calculate how much you’ll owe in tuition, living expenses, books, and other fees.
- First year salary. Before taking out a loan that you might have trouble repaying, the general rule is that a student’s loan amounts should not exceed their first year’s salary. You don’t know what that will be? Well, you should start estimating.
- Read award letters carefully. They can sometimes be misleading or difficult to interpret. To be sure, you might want to have someone else read them as well.
- Max out available federal aid. Do this before applying for a private student loan, which doesn’t require a credit check or co-signer.
- Check out multiple lenders. Compare loan terms, interest rates, any loan fees, and what borrowing costs.
- Look for lenders that pre-qualify. “Soft” credit checks will allow you to compare offers without hurting your credit.
- Notice the APR. When comparing, note the annual percentage rate and not just the interest rate. The APR includes the interest rate plus any lender fees.
- Ask about repayment terms. Some private loans have multiple repayment plans from which to choose.
Now that you know what to do when researching private student loans, you can stop procrastinating and get on with the business of trying to finance your education. One of your first stops should be Juno, which is about making higher education affordable and accessible to all. Chances are, they can help you too.
