Private loans, also known as alternative or private student loans, are providing a growing number of college students with much-needed education funds to cover college-related expenses that may not be covered by award caps, Federal student loans, scholarships and grants. As long as proof of enrollment is provided to your lender, and you qualify, you could use a private loan to pay for almost any of your educational expenses. Some private loan lenders even let you borrow to pay for previous school fees.
Got bad credit, no credit? That’s not a huge obstacle – as you will find out, using a qualified co-signer when applying for a private loan can mean a greater chance to get approved for your loan, a lower interest rate and a higher loan award!
Private student loans – Pay for just about all your college-related expenses, not just tuition
It’s important to take advantage of Federal student loans first, because they usually offer the lowest student loan interest rates.
To apply for Federal student loans, just complete a Free Application for Federal Student Aid (FAFSA Form). However, Federal student loans may not be enough to pay for your tuition, not to mention other costs of attending college.
What’s especially valuable about private loans is that you may use them to pay for practically all your college-related expenses, including:
- Tuition and fees
- Books and supplies
- Room and board
- Living expenses
Private student loans help you get you the education funding money you need
Unlike Federal student loans, private loans distribution amounts are not solely based on predetermined need – you can apply to borrow as much or as little as you feel you need to cover any of your educational expenses. Just be sure not to over borrow to keep your student loan debt at a manageable level.
Depending on the type of private loan you are seeking, many private loan lenders offer qualified borrowers private student loans as little as $500 or as much as $40,000 or more per year to cover your cost of attendance, less other aid you may receive (such as grants, scholarships or Federal student loans).
Applying for a private student loan could get you the money you need EASIER and FASTER
While approval for Federal student loans requires time and the need for financial aid forms, you could be pre-approved for a private loan within minutes of applying and your funds could be sent to you within just days of final approval! Many times the private loan application process is very simple and can even be done either over the phone or online.
Not a full-time student? You can still apply for a private student loan!
Even if you’re taking just a couple courses, you could still be eligible to receive a private student loan to cover the expenses. Most private loan lenders will give you a loan whether you’re attending college full-time, part-time or half-time.
Unlike Federal student loan awards that are based on an individual’s financial need and EFC (Estimated Family Contribution) amount, private loans allow you to apply for as much money as you think you’ll need to cover your educational expenses. Even International students with an eligible U.S. co-signer are eligible for private loans. Most private loan lenders have just a few criteria for an individual to be eligible to apply for a private loan, such as:
- Must be creditworthy applicant or have a creditworthy co-borrower;
- Must be a U.S. citizen, U.S. permanent resident, or international student with qualified U.S. citizen or U.S. Permanent Resident co-signer;
- Must be within the age of majority by your state (typically 18 years of age);
- Other qualifications, such as employment status and history, enrollment verification and attendance at a qualified school, and income verification are often required by most private loan lenders.
A plethora of private loan types available
Many private loan lenders have private loan products tailored specifically for your student status, including:
- Undergraduate students;
- Graduate students;
- Medical students;
- Law students (Law School and Bar Study Loans) and other professional degree seekers;
- Continuing education students;
- Kindergarten through high school, especially for private schools (also known as K-12 private loans)
Getting a private student loan or alternative student loan is based on your own creditworthiness
Because private loans are made by private institutions rather than the government, your ability to get a loan is based on your credit history, ability to repay a loan, employment history, debt-to-income ratio and other criteria. As a student, you may not have had the opportunity to build up a solid credit history. That’s why having a co-signer can be in your best interest (no pun intended!).
Got bad credit or no credit? No worries, having a co-signer can help you get a private loan!
Since the loan amount and your interest rate will be based on several criteria of merit, often a credit-worthy co-signer could not only increase your chance of getting approved but also help you obtain the loan amount you’ve requested along with a lower interest rate. In addition, using a co-signer can help improve your own creditworthiness.
Unless you’re employed full-time, have excellent credit and a decent annual income, it is often recommended to include a creditworthy co-signer when you apply for your private loans to increase the chance of qualifying for one. Your co-signer can be a parent, relative or other creditworthy adult.
Many private student loan or alternative loan lenders give you various repayment terms and options for greater flexibility and manageability of your private loan balance
Most private loan lenders will defer your payments while you’re in college (length of time determined by the type of program you studied) and give you a grace period of 6 months before you are required to start repayment to give you time to get financially situated after college. To make things even more convenient, many private loan lenders will give you a choice of repayment terms, including:
- Immediate payment of principle and interest; or,
- Immediate repayment of interest only; or,
- In-school deferred repayment of principle and interest until leaving college.
Forbearance options may also be available during repayment should you experience economic hardship.
When it comes to paying back your private loans, many lenders give you up to 20 or 25 years based on your original loan balance and type of private loan.
No pre-payment penalties mean that so long as you make your minimum payment, you can pay off your loans as quickly as you want, without any additional costs or fees!