Private Student Loan

Private student loans are available to fill the gap when government loans are not available or are not sufficient to cover the full cost of a college eduation.

Many of the Federal student loan programs available require no credit check and provide substantial sums for financial aid. However, these programs are need based and often carry other criteria that make it difficult for individuals or families to qualify. In many cases, even if you do qualify, the loans only cover a portion of the total cost of your education. Private student loans are available to make up the difference.

There can be drawbacks to a private student loan. It will almost alway require a credit check, which may be no problem for those with good credit or who do not have a lot of existing debt. As with other types of loans though, if you have bad credit or a high amount of debt, you can be required to pay higher interest rates on your loan.

Fees are another issue to be aware of with private college student loans. Fees can be taken off loan amounts before they are given and can made a big difference to what you are required to pay back. A relatively modest loan of $4,000, for example, can have 4% in fees applied prior to distribution. That means $160 of the total is money you never see but must be repaid. As a rough guide, every 3% of fees is equivalent to an additional 1% on top of the stated interest rate.

The obvious advantage of a private student loan is that it is available to those who may not qualify for a government loan. Private lenders have an interest in making student loan money available to borrowers and may work harder to help applicants qualify. Federal lenders, on the other hand, have a less flexible set of criteria and there is typically no real appeal process if your application is denied.

For some people, not having to deal with an impersonal, often illogical, bureaucracy can be another advantage of private loans. Private money lenders usually maintain customer service departments that will answer customer questions. Federal loan programs typically have contacts and help available as well, but the answers you get can vary in terms of quality.

When you apply for a private student loan, you will have to fill out the FAFSA (Free Application for Student Aid) form(s), or supply the supplemental documentation. Applications for private loans tend to be simpler, but be sure to check for any fees. As described above, fees can substantially add to the total cost of the loan.

Fees and interest rates for private loans may be higher or lower than government sponsored loans, depending on the individual program. The most desirable private loans will have no fees and interest rates that are near the prime rate. The 'prime rate' is the rate banks charge one another or their largest, most favored customers.

Getting a rate at prime is a good deal, getting a rate at 1% below prime is a great deal. To qualify for that type of loan it's usually necessary to have a great credit history and/or get a loan with a co-signer who has excellent credit.

The only way to know for sure what is available is to do your homework. Use a loan calculator, such as that available at www.bankrate.com to run through some sample scenarios. To get a true picture of the total cost of your loan, be sure to include all the actual costs over the lifetime of the loan.

Back-to-School Promotion

More About ...

Notable Quotes

quote openThe difference between a successful person and others is not a lack of strength, not a lack of knowledge, but a lack of will.quote close
~ Vincent Thomas "Vince" Lombardi

Financial Freedom RSS Feed

Triple Advantage from Experian

Copyright © 2012 - 2013 ControlCreditCardDebt.com | Private Student Loan
Template Design by AJ