Private student loans are offered by banks, credit unions, or finance companies. Students apply for the loans who are getting difficulties in financing their educational expenses. In private student loan program, the eligibility criteria, terms and conditions and interest rate vary by lender to lender.
In Private student loan program, the repayment terms are bit difficult than Federal student loan program. Usually, you have to pay your loan payments on monthly basis. The main disadvantage of Private student loan is that you can not postpone your payments no matter you are suffering with difficulties and hardships.
In Private student loan program, the interest rate vary from lender to lender. Usually in private student loan, you will be charged for high interest rates on the amount that you borrowed. So always get exact amount of your loan that what you need to pay for your educational expenses. Interest rate depends on many factors such as how you’ve managed your credit in your past experience.
It reduces the Monthly Payment Amount by extending the repayment duration. But if you do so, your total cost will be higher than your standard repayment plans and schedule. In Private student loan program, they offer different repayments plans which can help you to reduce your interest rate on the amount that you borrowed.
In Private student loan program, they’ll require your credit score history in order to approve your loan application. With the help of your credit score, they will get an idea of your ability and willingness to repay the loan amount. They will also review your creditworthiness before making the loan.
In Private student loan, it’s not mandatory to apply only students for this loan program. Your guardian, parents or relative can also apply for this loan to finance your educational expenses.
Rate Reduction Program
Those students who can afford to pay a reduced amount of the loan, the rate reduction is an alternative payment program for them. In rate reduction program, your monthly payment amount will be reduced for a while you will get a reduced interest rate on the amount that you borrowed for atleast 6 month duration. The main disadvantage of rate reduction program is that your total loan cost will be increase as compared to your previous repayment standard plan.
Role of a Co-Signer
In Private student loan program, the lender company requires you to provide a co-signer for your loan as a guarantor. It means, in case of default repayments, your co-signer will repay your loan amount. However, eligibilty criteria for Private student loan program depends on you and your co-signer financial status and information.
Before applying for a private student loan, make sure that whether you have completed your graduation degree or not, you need to pay back student loans. Defaulting on a student loan can have a negative impact on your credit health.