For many students seeking higher education, Federal student loan programs are not an option or they simply don’t fit the requirements. For almost all Federal student loans the requirements are based on need for lower income students rather than credit history. If the student does however have the financial means private student loans are a great option for the expenses of college tuition, books, school supplies, housing, and auto.
When it comes to private student loans, the best offer the lowest interest rates or they have a partial forgiveness clause, which is also a big benefit when deciding on a lender to go with. For example, a lot of private student loans offer a certain dollar amount dependent upon graduation, which is typically around $200-$300 and only applies to principal reduction, not interest.
The student should choose a loan that offers the lowest possible interest rates and some sort of deferment. The student can choose to have payments deferred until after they graduate, or the student can also make interest-only payments as long as it is during the time that the student is enrolled in a college or institute. Some lenders also offer a grace period that can last up to 6 months after the student graduates, and during this time there will not be any payments due towards their student loan.
As far as obtaining a student loan with the lowest interest rate, this will vary from lender to lender and could also have many other factors involved. Most commonly when a student applies for a private student loan the lender will then look at the student’s credit history upon determination of the loan. Typically a lender will want at least 27 months of good credit history. This means that the student needs to have at least 27 months worth of good credit history with no defaulted payments or any late fees.
More often than not, private student loans do require a cosigner, unless of course the student is enrolled in graduate school. This is because a typical college student is a student that has graduated from high school and has not yet had enough time to build their credit score. Some states require an applicant to be at least 21 years of age before they can enter into a loan contract. However, most commonly the age requirements are that the student be at least 18 years of age before entering into a loan contract.
For most students the option of having a co-signer is a must before they can receive a private student loan. A co-signer is someone with a good credit history that will sign with the borrower on a loan contract stating that he or she, along with the primary borrower, will accept responsibility for the payment of the student loan in the event that the primary borrower does not pay their monthly payment installments.
Private loans are beneficial because they can provide a fast solution to college expenses for a student. With a lot of Federal student loan programs it can take several months to be processed and disbursed to the students.
Most commonly, with a private student loan a student can expect to receive money distributed within 5 business days. After the student has obtained their loan funds, the fund can then be used for multiple purposes such as tuition, books, or living expenses. With some Federal student loan programs they limit the amounts that are disbursed and limit how the money can be used.
So if it is where the student has a good credit history and the student is able to make the monthly installments set in a contract, then private student loans are something that a student should look into when choosing to attend college. So shop around and look for the best rates and options for you when choosing a private student loan.