Private Student Loans

What are Private Student Loans? Private student loans are an alternative source of funding for students and offer better interest rates than other types of private loan. Students should always check their eligibility for federal student loans, scholarships and grants before taking out a private student loan.

As with a federal student loan, applicants must be attending a course which is eligible andthey should be studying at least half time. However, to receive a private student loan, you must have a good credit history. Alternatively, you may be able to get a private loan with a cosigner who does have a good credit report.So, even if you don't have a good credit record, a student private loan is not automatically out of the question.

As there are a number of companies competing for your business, private student loans will have competitive rates and you should look for the best deal available. for example, some will offer you a six month grace period, allowing you to start repayments six months after you graduate, which is a big advantage as it enables you to find a job and sort out your finances before dealing with your student debt. However, you need to be aware that this is likely to increase your overall repayments.

Private student loans will offer different repayment options such as :

  • allowing you to start repaying both the principal and the interest right away
  • allowing you to start repay ing interest only while you are still in college (at least half-time)
  • or premitting you to defer all payments (that is both repayments of the principal and the interest) while you are still studying, again this must be at least half-time.

Rates of interest and other terms will vary for each option and so you need to look at all the loan conditions very carefully.

 Some Important Considerations when Taking Out a Private Student Loan

Use private student loans as a last resort and only to top up other sources of funding such as federal loans and grants or scholarships.

Think long term. When looking for the best private student loan, remember that you will have to repay all of your loans and overall interest rates on private loans are likely to be higher.

Choose your cosigner with care. Often family members or close friends co-sign private student loans. don't forget that they will be responsible for the repayment of your debt if you default. So make sure that both their finances and your relationship can withstand the worst case scenario.