Private student loans, otherwise known as alternative student loans, have grown in popularity over the recent past among college students and here is the reason why. The cost of education is rising at a very rapid pace and by the same measure does the application of federal loans making the process tiresome and sometimes not rewarding. Worse still, due to the high demand for federal loans, sometimes students get a loan that will not be enough to pay for their educational expenses.
This has forced many students to resort to private student loans, either to supplement federal loans, or better still to cater for the total educational requirements. Private student loans are loans extended to students by banks, private financial organizations, credit unions, etc. These loans are extended to students based on their credit record and would need one to apply with a co-signer. Some of the major benefits of private student loans include:
First off, one can get private student loans with less effort and faster as the approval process takes very little time and may take as little as five business working days once one is approved to get the loan. The other benefit of these loans is that the amount extended is normally higher compared to scholarship and federal funds, giving you an opportunity to buy other things such as laptop, books, and pay for various other educational expenses. Equally, you can apply for the loan anytime without having to worry about the closing dates.
The loans are quite flexible and one may consolidate them into a single loan for easy payment. Additionally, government loans are normally quite restrictive on how on spends the loan money, but not with private student loans. This is because it’s an agreement between you and your lender meaning also there would be no need for any government paperwork. While there are so many advantages in private student loans, they also have their own share of disadvantages.
First off, they are only extended to credit worthy people and in most cases; you will have to come with a legitimate co-borrower (mostly a parent) to help co-sign the loan application document. In addition to these disadvantages, these loans come with a huge interest rate compared to government student loans. Private student loans interest rates may vary from time to time, unlike government student loans whose interest rates are fixed for the entire loan tenure. Finally, unlike the government student loans that needs only a single application, private student loans will need you to apply and reapply each academic year as the applications are treated as separate.
What private student loan lenders look for?
You have to have a clean credit history of at least 21 months, you needn’t have changed your residency in the last one year, should be a US citizen or a permanent US resident, should be able to prove your current revenue with a job in the locale where you’ll be attending school, should have worked for a minimum of 2 years, and if it’s a business, should have been in business for at least 2 years.
