Private student loan mistakes borrowers should avoid

While the summer months are best known for vacations and barbecues, for a certain segment of the population July and August are also the time to get your finances in order. In particular, this is the time when college students preparing for the fall semester typically apply and secure funding for the upcoming year. Whether they are entering their final year of graduate school or just beginning their college education, they will likely need some form of financial assistance for their education.

They can do this in two primary ways: through federal student loans, which are provided and serviced by the government, and Private student loans, which is financed through private companies. Most borrowers will lean towards the latter when the former is not enough to fully finance their education.

Private student loan borrowers have multiple benefits. To get the most benefit, however, borrowers should do their research and be careful to avoid some common mistakes. Start by exploring your personal student loan options here to see how much you qualify for.

Private student loan mistakes borrowers should avoid

Here are three common mistakes that private student loan applicants should avoid making.

Not shopping around

When it comes to financial products and services it pays to shop around before signing on the dotted line. This is true for everything from Pet insurance per life insurance Mortgage. Private student loans are no different. You won’t really know if you’re getting the best rates and terms until you’ve done your research and shopped around and compared multiple private student loan lenders. But compare more than just interest rates. Check each lender’s terms and conditions and their repayment schedule and flexibility. It is possible that a slightly higher interest rate may be better for you if other options are favorable to your personal situation.

When comparing private student loan lenders, be sure to complete a proper, side-by-side analysis. So make sure you get rates from at least three lenders for the same amount for the same period. This will ensure that you have an apples-to-apples comparison to use and that the final lender you choose is truly the best for your situation.

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Apply with a poor credit score

The best private student loan rates and terms are reserved for the highest applicants Credit score And the clearest credit history. So make sure you do Make your score as high as possible Before applying, otherwise, you risk being rejected for a loan (or you get one with a less favorable rate).

For applicants with an imperfect credit history, consider adding a co-signer. A co-signer with a favorable credit profile can go a long way toward improving your application. And it doesn’t have to last. Once you are able to build a credible credit score and history, you can remove the co-signer from the loan and pay it off yourself. Either way – with or without a co-signer – don’t apply without knowing and raising your score as much as possible in advance.

Applying more than you need

It can be tempting to maximize your personal student loan aid by over-applying for aid. But applicants should avoid temptation. The more approvals you get, the more you’ll have to pay back—and the less disposable income you’ll have after your college years are over. Instead, consider applying for the bare minimum you need to get by, once federal loans and other savings and assistance are exhausted. Remember: Interest and fees can add up quickly. Do your best to minimize how much they will cost you by only applying for what you need – and nothing more.

Explore your personal student loan borrowing options here now to learn more

Bottom line

Private student loans can be a reliable and affordable way to finance your college education. But, like all other loans, there are some pitfalls that borrowers should try their best to get the most out of their funds. Specifically, they will want to shop around and compare multiple lenders (at least three) before taking out a loan. This will ensure that they get the loan at the best and lowest rate possible. But they’ll want to make every effort to improve their credit scores before they apply — or add a co-signer to secure better terms. Finally, applicants should avoid applying for more funding than they need to avoid being stuck with large loans and high interest rates past their graduation date.