All you can know about your Private Student Loan Option
Have you exhausted your grants, scholarships, and federal student loan options available? Well, you might still want some assistance to cover the cost of college. That is where private student loans come into picture.
Private loans are provided by private lenders with their specific interest rates, terms, and eligibility preferences. For instance, if you need to borrow money for school, a private student loan can help you get the funds that you need to attain your degree.
But in order to understand private student loan refinance as well as consolidation, it is important to learn more about what private student loans really are. So, let’s dig a little deeper into them and learn how they are different from the federal loans:
Federal Student Loans VS Private Student Loans
When it comes to federal student loans, they are issued and guaranteed by the Department of Education. In addition, the interest rates for federal loans are also fixed by the government each year. These rates are same for all the borrowers and the credit score is not considered when applying for federal student loans. Instead, you need to apply by submitting a FAFSA form, which the Department of Education uses to decide the amount you need to borrow.
On the contrary, private student loans are not dispensed by the federal government. Instead, they’re funded by private credit unions, banks, and different types of lenders. This means that if you need to get a private student loan, then it is essential for you to apply to every individual lender.
Moreover, private lenders will then review your job history, credit score, and several vital factors to decide whether or not you are accepted. In case of an approval, the interest rate as well as loan terms are decided based up on these personal facts.
Private Student loan Interest Rates and Terms (Important factor in private student loan refinance)
As stated above, interest rates on private student loans are fixed by individual lenders established on the basis of each borrower’s financial condition. This means that interest rates of private loans have quite a range.
Private lenders can offer variable or fixed interest rates to the borrowers. A fixed interest rate means the rate never changes and your monthly payments will always be the same amount. Fixed rates are usually the best option since there are never any surprises when it comes to your payments.
With a variable-rate loan, the interest rate is tied to the market and can fluctuate up or down. Usually, variable-rate loans start out with a much lower interest rate that has the potential to increase later - meaning your monthly payment can change and you might end up paying more in interest over the life of the loan.
Private lenders also offer a variety of private student loan refinance terms. You can choose a short repayment term of 10 years or less in order to get out of debt fast (but your monthly payments might be pretty high). Or you can opt for a longer term of 15 years, 20 years, or even longer. A lengthy repayment period helps to keep monthly payments lower, but you’ll spend more on interest.
Again, the exact terms of your loan will depend on your credit worthiness and what your lender offers. We recommend applying to several private lenders to find your ideal interest rate and term.
How you can get Qualified for Private Student Loans
Most private lenders base their approval process on your credit history and income. A low credit score or no credit history can make it tough to qualify for most private student loans.
In this case, getting a cosigner can help; a trusted family member or friend with good credit can cosign your loan to increase the chances of your approval. However, it’s still your responsibility to repay the loan and there are serious consequences for late or missed payments. In fact, failing to repay your student loan doesn’t just hurt your finances - it impacts your cosigner’s credit, too.
The best way to make sure you qualify for a private student loan is to check your credit ahead of time and take steps to improve it if necessary. Having good credit when you apply not only means you’re less likely to need a cosigner, but you’ll get the best interest rates, too. That means less money out of your pocket to cover the cost of school.
If you want to learn more about private student loan consolidation and refinance, then you can consult our experts anytime.
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