Private student loans are generally an alternative when you aren’t eligible for a Federal student loan. This could be the result of defaulting on a Federal student loan, borrowing your maximum amount, or enrolling in a program that is not approved for Federal student loan funds. It is important that you make sure you will be able to make all of your student loan payments when they start coming due to prevent having negative reports on your credit. You may want to consolidate your private and personal student loans to make the payment more affordable and convenient.
The interest rates on a private student loan are often a few points higher than for a Federal student loan. This is because there is no collateral attached to your loan and there is no security for the lender should you not repay your loan. Your interest rate will depend on your credit history. You will also be assessed a loan origination fee.
Private student loans require you to make a monthly payment towards the interest. The dollar amount varies depending on the lender. Some require you to pay a percentage of the loan amount and others have a set monthly payment as low as $25 per month. It is very important that you compare the rates and terms of a private student loan. This will ensure you get the best possible repayment arrangements for your private student loan.
You need to be careful of scams out there pretending to be credible private student loan lenders. Students are scammed out of millions of dollars each year. Make sure your private student loan lender is legitimate by checking it out with the Better Business Bureau. The way most of these scams work is having you pay an application fee. The application process for a student loan should always be free regardless of the lender you decide to use.
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