Understanding Private Student Loans

Private student loans are one of the many options that you have when you need funding to help you obtain your college degree. Private loans can vary significantly in amounts, interest rates, and repayment terms. There are a few basics that you will want to know about before you sign your promissory note for a private student loan.

Where Can I Get A Private Loan?

Private student loans can come directly from a financial institution or from your college. A direct loan from a bank or other financial institution is often much higher than federal student loans, but may also have a much higher interest rate. Interest rates also often go into effect immediately with a direct loan, while federal loans often have a reduced or deferred interest. Private loans may also have some fees associated with them, while the fees for federal loans are taken out before disbursement.

If you want private student loans, you need to apply for them through your financial institution. You may need to have good credit, or have a cosigner, in order to qualify for this type of loan. Many banks will work with parents of college students to help create a loan that ensures their education is paid for using personal equity in properties or other collateral. Private student loans are designed to close the gap that occurs for students receiving federal financial aid, and who need more money to pay for expenses associated with college.

What about Repayment?

You will need to repay your private student loans according to the terms that were outlined in your original contract. If you have a period hardship that prevents you from repaying, you may be able to use a deferment period to put the loan off for a time when you can begin to make payments again. There are also some specific criteria that allow you to discharge your student loans, such as working in specific health and government based fields.

If you suffer from a permanent disability, you may also have your private student loans discharged. These exceptions are uncommon, however, and may not apply to you even if you are having difficulty repaying your loans. Asking for a loan consolidation may help you make payments, as will loans that have a fixed interest rate. Private loans often have variable interest rates, but if you are borrowing federal monies then you will often have the benefit of a fixed interest.

This entry was posted on Sunday, September 5th, 2010 at 4:39 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.