Finding ways to fund college is challenging for many students. With the rising cost of education, students often find that scholarships and federal loans are not enough to manage their expenses. In some situations, applying for a private student loan is the best solution to get through college and to make an excellent career in future.
What actually is a student private loan?
The financial background of all students studying in a college varies widely. Many of them lack enough funds to apply for a higher education. Consequently, they start hunting for loans to make their dream of holding a graduate degree come true. Borrowing money from different private and federal sources should be done judiciously.
Numerous private financial institutions are coming forward to help the students in accomplishing their career goals with ease. The loans they offer to the students are known as private student loans.
The Gap in Expenses
While the cost of college is variable based on several factors; it is easy to end up with a gap in the amount of funds available and the expenses of college education. Students must pay for tuition, laboratory fees, books, dorms and other living expenses during the duration of college.
A major reason that many students consider private student loans is for covering the additional expenses that federal loans or scholarships cannot cover. Providing enough cash to cover the gap in expenses and available funds will allow college students to avoid complications like working full time while attending school.
Avoiding a Co-Signer
Government student loans and many lending opportunities will require a co-signer. In some cases, a co-signer will not have good enough credit for traditional government loans or students might prefer to avoid involving a third party in the loan.
Student loans without a cosigner are available through private lenders, though some restrictions might apply based on the particular situation. The loans that do not require a co-signer will still check a student’s credit history, but a well-established credit score and report will allow some students to avoid the possible challenge of finding a co-signer.
Low Interest Rates
The interest rate for a private student loan is set by the current market conditions, which can mean it is possible to obtain much lower interest charges on a loan than the federal loans are offering.
While private loans offer interest rates based on current conditions, students should always look into the type of interest before selecting a lender. Ideally, students should select a loan with a fixed rate rather than a loan with a variable rate, even if the original variable rate is slightly lower. The variable rate will change as the market conditions change, so it can end up with higher repayment costs over the life of the loan.
Variety of Term Lengths
Federal loans have limitations on the final term of the loan. Unless students consolidate the federal loans after college, the original length of time to repay the loan is ten years. Private loans for students offer more initial variety, so students can select a longer term without consolidating the loans at a later date.
With more variety of payment plans, students have better control over the monthly expense of private loans. During the initial years after college, a long-term loan will have a much lower monthly expense.
What, if a Student Without a Co-Signer Apply for Loan?
According to a recent survey Measure One, a student loan company, approximately 6% of undergrad students get loans without co-signer, whereas near about 40% of graduates qualify for loans easily with no co-signer.
Applying for a student loan without any co-signer is possible but risky. Not getting the right co-signer means to take the loan on your name. In such a circumstance, the interest rates will be fixed depending upon your income potential and credit score.
If you have no credit history or a co-signer, Federal Student Loans can rescue you from the situation. Fill the FAFSA or Free Application for Federal Student Aid to know whether you’re eligible for getting scholarships or federal grants.
Make sure that your credit card’s FICO score ranges somewhere between 300 to 850. Your chances of qualifying for a private loan with low rate of interest increase with an increase in your FICO score. However, this is important only when you’re applying for a private student loan.
The lending processes of private student loans vary from one lender to another. Sometimes, private lenders also opt for FAFSA forms and hence, ask the borrower to submit necessary documents required for it. You can now fill the private student application form online. While doing so, make certain that the source you’re going to use is trustworthy.