Private student loans are loans offered by banks and other private lenders. It is different than the federal student loans which are available through the government program. Most of the time, the government student loan is not enough to cover the entire cost of your tuition fee. This forces the student to look for financing through private student loans. The following are five steps to take when shopping for a student loan.
1. Check Interest Rate
The first step is to check the interest rate of the student loan. Fixed rate student loan is cheaper than variable rate student loan because the interest rate is fixed throughout the loan term. Variable rate interest rate may start with a low interest rate just like the interest rate charged on a federal student loan. However, it is most likely to increase by 1 – 2 percentage point in the following year.
Ultimately, the variable rate student loan will end up having a percentage point that is 3 – 4 points higher than the initial interest rate at the end of the loan term. You can look out for loans that offer interest rate discounts on automatic debit payments. This allows you to get some discount when you set the repayment amount to be automatically deducted from your bank account every month. If possible, you should choose a shorter repayment period so that you pay lesser interest fees.
2. Check Fees
Second, you must check the fees of the student loan. Origination fee, prepayment penalty fee, late fee and penalty rates are some of the fees that are frequently charged on a student loan. The lesser the fees, the cheaper the student loan will be.
3. Flexible Repayment Option
The student loan should offer a flexible repayment option. It should allow you make the repayment while in school. If you start making repayment while in school, you will soon pay it off by the time you graduate or soon after you graduate. You can also check if it allows you to set your own repayment date. In this way, you will be able to set a repayment date that is the most convenient for you to make the repayment.
5. Minimum Requirements
Every private loan has different minimum requirements. Most have a minimum requirement for the income level and credit score. If you have poor credit score, you should be able to apply through a cosigner.a minimum houran be your parent or someone you know who is willing to be responsible in repaying the debt if you fall behind on payment. There are some loans that require you to achieve certain type of grades or have a minimum hours of attending a course. Using a loan comparison tool to compare the student loans is the best. It allows you to submit application for getting preapproved without being affected by hard inquiries.