How To Get Private Student Loan
Private student loans are a way to pay for college if you’ve maxed out on your federal student loan options. They can help you pay for the cost of tuition and living expenses, but they also come with their own set of restrictions and risks. Here’s what you should know about private student loans before deciding whether or not to apply for one:
Start with federal student loans before private student loans
Federal student loans are the best option for most students. The federal government’s loans are more flexible, affordable and likely to be forgiven than private student loans. Federal loans also come with better repayment options and offer more protections in case you run into trouble.
If you’re eligible for federal aid, it’s best to take advantage of that first before turning to private alternatives.
Look for the best interest rate and repayment terms
- Compare interest rates. Private student loans are often based on your credit score, so the interest rate can vary. Typically, the best private student loan will have a lower rate than federal loans and still provide perks like flexible repayment options.
- Determine fixed or variable terms. Some private student loans offer fixed rates over the life of the loan while others change monthly or annually based on an index that changes over time, such as LIBOR (London Interbank Offered Rate). You’ll typically pay higher interest with variable-rate loans because they fluctuate with market conditions and aren’t set in stone—but if you’re planning to make payments for less than 10 years, this probably won’t matter much to you anyway since it’s unlikely that these rates will rise dramatically over such a short period of time (and if they do rise too high for you, there are ways to refinance).
Have your personal and financial documents ready
Before you can get a private student loan, you’ll need to have the following documents ready:
- Your tax returns and W-2s for the past two years.
- Two months’ worth of bank statements.
- A copy of your credit report from all three major agencies (TransUnion, Equifax, and Experian).
- Your most recent credit score from at least one of those agencies.
The lender will use this information to determine how much they’re willing to lend you based on how risky your financial history appears—the higher your credit score and lower your debt-to-income ratio, the more likely it is that they’ll be able to offer you the best terms on their loans. Having all this documentation in hand will help ensure there are no delays when applying because some piece or another was missing or unclearly filled out!
Read the details of the loan and ask questions before signing the contract
To get the best possible loan terms, do your research and ask questions.
- Ask about the interest rate. The higher the interest rate, the more you will have to pay back in interest over time. The lower your interest rate is, the better it will be for you financially (and emotionally).
- Ask about repayment terms. Are there any fees or penalties if you make a late payment? If so, how much are they? How often must payments be made each month or semester? And what happens if there are any changes to your enrollment status at school? Some lenders offer flexible repayment options that allow borrowers who may not be able to make their monthly payments on time due to unexpected expenses or other life circumstances—such as job loss or medical emergency—to defer their payments until they can afford them again without incurring additional fees or penalties.
A private, not federal student loan may be a way to pay for college if you’ve maxed out your federal student loan options.
Private student loans are not guaranteed by the government, but they are available to students who have exhausted their federal loan options. Private loans often have higher interest rates than federal student loans, so you may end up paying more in interest over time. You might also have to pay fees and origination charges that can add up quickly if you’re not careful.
However, private loans can offer more flexibility than other types of financial aid and may be a good option for students with extenuating circumstances who need access to additional funds during school. Private lenders don’t require credit checks like many federal lenders do—though eligibility requirements vary from lender to lender—and they allow borrowers to borrow all at once or over several years as needed (like with an installment plan).
We understand that student loan debt can be overwhelming and confusing, which is why we’re here to help. If you’re interested in exploring private student loans or need more information on your options, we encourage you to contact us today.