College Money – Private Student Loans 101

Rounding up college money is one of the most difficult parts of preparing for college.  This is especially true for students who do not qualify for full federal financial aid due to their parent’s income.  What the government doesn’t take into consideration is that everyone has bills and even if you don’t qualify for federal aid, you still need financial assistance.  Most of these students are forced to take out student loans through private sources.  Private student loans are for students who don’t qualify for federal aid, but the student must have good credit to receive these loans.

Many lenders off private loans to students or their parents.  The application process is free and the loan requirements usually have more repayment options available.  These are not need-based loans but rather like any other loan you would take out to make a major purchase.  These loans can be used for anything college related including fees, lab fees, dues for associations, housing and books.  The student can also receive an education loan even if their college tuition is already covered by grants or scholarships.  Students whom are eighteen years or older can apply for a student loan but may require a cosigner.

Credit also plays a large part in being able to receive a private loan.  Your bank will run a credit report before deciding whether or not to lend you the money.  If you have poor credit you will be forced to pay a higher interest rate.  Lenders also have the option of refusing to lend you money if you have a bad credit history.  For example, too much credit card debt or too many credit cards can work against you.  Banks will assume that automatically have a balance of $3,000 on your credit card regardless of whether you do or not.  They may also look at what your current financial obligations are before deciding whether or not to give you a loan.  Students with a poor credit history may be required to attend credit counseling prior to receiving the loan.

Most student loans offer deferred repayment until the student has completed college or leaves school.  At this time the student may make arrangements for repayment.  The student may also choose to pay the interest part of the loan while they are attending school.  Most lenders are flexible and offer many repayment options to students and graduates. Students will find that paying on the interest while attending college will greatly reduce the amount due after graduation. Most student loans are required to be paid back in ten years.  Longer repayment periods may be negotiated if the student has required a large amount of student loans.

There are numerous lenders available to students that offer student loans.  Many times your local bank will allow you to take out a private student loan. Take time to investigate the options you have and the different types of loans that are offered.  You will also want to consider interest rates and repayment options.  Researching will ensure that you receive the best offer available.  Interest rates tend to be higher than what as student would receive through a federal Stafford loan or Perkins loan.

When applying for a loan it is important that the student realizes that a loan is a loan.  Credit unions may even require that a vehicle or boat be used as collateral for the loan.  The loan agreement is a valid contract in which the payment terms and schedule are outlined.  This is a legal obligation that cannot be breached.  This is very important for students to realize and is another reason that students should not borrow more money than they need.  Students and parents should scrutinize the loan agreement and be sure that everything is correct before they sign the agreement.

Borrowing money for college does not have to be a headache and even if you do not qualify for full federal aid, private student loans can help fill the gap.  Students should educate themselves on what is a good interest rate and what their credit history looks like before accepting a student loan from a lender.  This is a very important aspect and should be considered before accepting a loan.
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©2013 Tanya Knight International, Inc.

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