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The two faces of private student loans

May 02,2011 by: Dallas Browne

Not all can be lucky enough to pursue their ambition of higher studies without additional resources to fund them. There are many resources you can count on to supplement you as you work towards your dream and private student loans are one such option.

The private student loans provide various benefits as listed below.

Bridge the gap

You do have Federal educational loans and scholarships coming to your rescue but there is a limit till which they can be claimed. If you have to provide for other facilities like your hostel expenses, extra studies and so on, this amount will not be enough. There is no alternative but to look out for something else that bridge the gap and help you cope with the situation. Private student loans are the most obvious solutions you will have.

Chances of low interest rate

The Federal student loans will come with relatively lesser rate of interest, their very purpose being convenience to students. The drawback with this scheme is that the rates will not decrease even when the rate of interest drops below the offered rate. In case of private loans, the interest rates are usually varying, so you will be able to take advantage of the downward trend in interest rates.

Easy to avail

Private student loans are offered by many banks, private lenders and credit unions. You should have no problem applying for them. If you have a good credit score, you can get lucky to get a loan at relatively lower interest rates. This makes them a viable option when you need the processing to be easy and quick.

Many students have constantly relied on such private loans till the completion of their studies. Though there are advantages to the, there is also a flip side that you must be aware of.

Less flexible

When it comes to repayment options, Federal loans have more flexibility to offer to the students. There is advantage in terms of when you start repaying, the fixed amount that you have to repay each time and so on. The Federal loans take into consideration your economical background and will offer you befitting options but private loans may not do so.

Fixed interest

There are times when fixed interest seems easier to handle than variable interest. Firstly, there is an amount of predictability and hence it gets easier to plan finances when you have a fixed interest to pay. Moreover, you will not have any issues with the increasing interest rates.

Repaying can be a burden

The private loans are an attractive option for students to help them wade through their college life but they should be opted for only in case of dire necessity. The underlying point is that aiming for scholarships is any day better since you do not have to repay them. Loans are attractive only when they are minimal and manageable and keeping them so remains in the hands of the borrowers.

Students have to handle their lives in a very mature manner and handling their loans could be their first few lessons with respect to finances.

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