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Utilizing the private student loans

April 29,2012 by: Dallas Browne

Private Student Loans as opposed to Federal student Loans are intertwined but competing pathways to obtain educational financial aid. In fact, according to a recent estimate the growth rate of private student loan is much higher than the federal student loans, the exact figures are 25% one year versus 8 % every year. If this growth rate of private student loans continues to grow, then by the year 2025, the student loan will exceed the total volume of federal loan. Opting for a private student loan, may be a less complicated process than applying for a Federal Student Loan, but still the repayment options and the terms of conditions of the private student loan are more complicated than Federal Student loans.

Besides the high interest rates in private loans as compared to federal loans, the interest rates of student loan are subjected to change, bringing any change to which is again a complicated process. The general trend is to initially apply for federal loan, and if the loan is not granted, the student can opt for private student loans. In order to procure a private student loan, the student is supposed to read and understand the extensive terms and conditions of the loan, the loan repayment process, and then agree signing the loan document.

Several important aspects should be considering when applying for a private student loan, as numerous monetary complications are involved in procuring the student loans. The student is supposed to have a keen understanding of these different monetary parameters, specifically the loan repayment conditions, before selecting any loan for the purpose of education. For instance, the loan fees charged by the lender can sometimes significantly increase the cost of the private loan. A loan with comparatively low interest rate, but a high fee structure is going to cost the student as much as a loan with high interest rates and low fees. A good rule of thumb to understand this interrelation between fees and interest rates is that 3-4% in fees is about the same as an increase of 1% in the interest rate. The ideal loan should have a low interest as well as a low fee structure, and the student should be able to compare various private loans to decide the most suitable loan, ideal for education purpose and ideal for repayment too.

Comparison of private loans from different lenders is the only way to decide a suitable loan, as you are determined to take the loan. You must have the confidence of repayment and an effective future planning to be able to repay the loan that you have taken on interest. While comparing, the student should also remember that nothing is permanent in the private loans sector and the loan terms and conditions are supposed to vary from one lender to the other. The parameters on which the loan terms may vary include; the credit history of the borrower and the co signer, and financial indexes.

Carefully, analyze the deal before signing up.


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