Applying for a private student loan? Here’s what the experts are looking for

The first day of school is fast approaching. For those heading off to college, that means the time to apply for financial aid is almost over.

Scholarships and grants are the best form of aid because they don’t have to be repaid, but to fill the gap, student loans can help. There are two types of this: Federal student loans, which is issued by the US Department of Education, and private ones. Private loans are issued by private companies and can vary widely in length, interest rate, eligibility requirements, and more.

You are applying Private student loans To fund your educational pursuits this school year? Here’s what experts say to consider.

Start exploring your personal student loan options here now.

What to look for in a private student loan, according to experts

Take a close look at the following things when evaluating your private student loan options.

interest rate

Interest rates are one of the most important factors when considering a private student loan. Not only will the rate affect your monthly payment, but it will also greatly affect the long-term cost of your student loan debt.

obviously, A low rate A higher one is better, but you should also look at the type of rates a private student loan provider is offering.

“You should consider whether your interest rate is variable or fixed,” says Nate Hoskin, founder and principal advisor at Hoskin Capital.

With a fixed private student loan interest rate, your rate and payments will stay the same for the duration of your loan. Variable interest rates, on the other hand, are the opposite. They adjust regularly, meaning they can rise or fall, moving your monthly payments up or down with them.

Co-signatory requirements

You should also consider whether you have co-signers. A co-signer is an adult who agrees to share legal responsibility for the loan with you — meaning they have to make the payments in your place if you default.

In many cases, Personal Federal Lender Needed A co-signer — especially if you have no credit or a low credit score. Because of this, “not having access to a willing co-signer can be a non-starter,” says Derek Brainard, national director of financial education at the AccessLex Center for Education and Financial Capability.

If you don’t have a co-signer and a lender is still willing to give you a loan, check the interest rate carefully. Many will charge higher rates without a co-signer on board.

fee

In addition to the interest rate, private student loan lenders charge a variety of fees to borrowers. These may include origination fees, application fees and more.

And that’s just upfront. Be sure to read the fine print and also learn about any fees you may be charged after taking out your loan — things like late payment fees, payment return fees, forbearance fees and deferment fees. There may also be fees for later refinancing if you choose to go that route.

Payment options

There are many repayment options when it comes to private student loans. Some lenders may require you to make payments while you’re in school, while others may give you a grace period and allow you to defer payments until after you graduate.

Repayment terms also vary in length, ranging from a few years to 25 years in some cases.

“When it comes to loan repayment terms, it’s important to understand the options, which can have different outcomes in terms of how much you pay over the life of the loan,” said Christine Balagentis, senior vice president of student lending at PNC Bank. “Shorter terms usually mean higher monthly payments, but less interest will be paid over time.”

You should also look into hardship repayment options if the lender has them. This can include things like forbearance or deferment, which allows you to pause your payments for a period of time if you fall on hard times.

discount

You should also look into any possible discounts the lender may offer. Many private student loan companies offer reduced rates for those who turn on AutoPay.

Some may offer discounts for graduating on time, opening a bank account or taking out another loan with the same lender or making timely payments. Even a small rate discount can make a big difference in your monthly payment, so be sure to compare carefully across companies.

Shop for private student loans here to find the best offers for you.

The red flags

Finally, look for red flags when comparing private student lenders and loans. The biggest one to watch for is poor customer service.

“Look out for unresponsive customer service or lenders who may not be entirely forthcoming when it comes to answering specific questions,” says Balagentis. “This could be a sign of potential communication problems and headaches down the road.”

You should also check for bad reviews, look for lender ratings and any complaints on the Better Business Bureau, and avoid companies with aggressive sales tactics.

As Balagentis says, “It’s best to avoid lenders or loans without transparent terms, who charge extra fees or who pressure potential borrowers to sign quickly.”

Consider federal student loans first

While private student loans can help with your higher education costs, it’s important to exhaust your federal options first. They typically have lower interest rates and more favorable terms, as well as benefits like loan forgiveness and income-based payment options.

Only once you have used all of yours Federal option You should consider a private student loan.