Applying for a private student loan is not difficult. However, it must be done with due diligence and persistent work or effort. You need to ensure the loan you are getting is something you undoubtedly need and can deal with financially.
A private student loan helps you to bridge the gap between what scholarships and federal loans can pay, as well as the actual cost of going to the school, not just the tuition. The expense of education is generally a lot more than tuition.
You may think you are completely prepared to put in an application for a private student loan. Well, before you get ready, we have outlined some steps to ensure you do not forget anything. For a little help, here is how to apply for a private student loan. Read on!
Leverage Grants and Scholarships First
Well, before anything else, the most critical step is using grants and scholarships first. They are indeed free money to aid you in paying for your school. Ensure that you have applied for all the scholarships provided at your university. Also, you can apply from outside sources before you decide to take out student loans.
Select Federal Student Loans
After applying for grants and scholarships, if neither can be used, then you need to choose between private student loans and federal student loans. Essentially, you need to choose federal student loans first before you take out a private student loan.
A federal student loan is better than a private student loan as it offers more benefits to the borrower. The benefits include an insured grace period, being qualified for student loan forgiveness, as well as profit-driven repayment plans.
Although you are not certain about requiring these advantages, it is best to have them. Just like any rule, there are cases when it may need to be crushed. You might need to take out private student loans is because of Direct PLUS Loans.
These loans offer a towering interest rate and do not offer a grace period. So, if you think that you can repay the loan and have a great credit history, it might be great to consider private student loans.
Compute How Much Money You Exactly Need
With your private student loans, you can get approved for the COA or cost of attendance. As such, you just need to get as much money as you need because most private student loans demand that you repay them as soon as possible.
To compute the exact amount you need, you must run the numbers of your entire cost of attendance. It usually entails supplies and housing, books, fees, and tuition. Also, you can see this online or on your award letter together with your financial aid account.
If you cannot see this, contact your school to obtain the whole estimate. You can do it by year or semester, relying upon where you want to bridge the gap with private student loans. When you have the total cost estimate, deduct the following:
● Your family contributions.
● Your own contributions.
● Federal student loans.
● Grants and scholarships.
Once you’ve deducted these factors from the total cost of attendance, you will then know the exact amount you’ll need to apply for private student loans.
Look For Lenders
When you learn the amount, you’ll need to borrow, use it to begin your search for private student loans. A private student loan creditor can be financial institutions, banks, or credit unions.
Once you start looking for a private student loan lender, the sea of options can overwhelm you. For the most part, there are two principles to consider as you search:
● Don’t choose the first two private student loan lenders you encounter online. As you search in Google, lots of advertisements will pop up, and it can distract you. Avoid them as much as possible.
● Check your rate through the pre-approval process. It is quintessential to study your loan terms with various creditors to compare.
Once you’ve created a list of creditors, differentiate the loan terms. Look for the interest rate, length of the loan, repayment plans, perks, and bonuses when you check your rate. Search for the best balance that suits your financial needs.
Understand The Qualification Requirements
While researching and comparing private student loan creditors, you must read the eligibility requirements. For the most part, there are common qualification requirements for most private student loan creditors.
Usually, you need to be:
● At least eighteen years old.
● A citizen of the country you are living in.
● Enrolled in a qualified school program.
Also, you need to leverage the funds for your university. Expect that your creditor will check the information about your school. And most importantly, have an excellent credit score and income.
Do You Need A Cosigner?
If your credit score is low or you do not have loan history, then you will need a cosigner. It is uncommon to look for a creditor who’ll deal with you without a cosigner if you have poor credit.
You could ask a friend or your parents to cosign your loan. Be careful about taking this agreement without preparing your financial situation. If you fail to pay, the cosigner will need to cover you up.
Once you know the amount you need to borrow, found the creditor and the terms you want, a well decided whether or not you need a cosigner, now, you need to gather your documents to apply for the loan.
You will need:
● Monthly expenses
● Any assets
● Proof of income
● Contact information
● Employment information
● Social security number
Once you’ve done pre-approval rate verifications, you may have a link in your email to finish the application. However, you can begin from the top and apply for the private student loan directly on the site.
The creditor will assess and examine your credit score when you apply. You can opt to apply for at least one loan. However, remember that it will impact your score.
Accept The Loan
Once you get approved, you will need to get the loan. Make sure to review the loan and validate the loan terms. Your university will attest the loan amount before it is transferred to your account.
According to Debt Statistics, the due student loan debt in the U.S. is at least $1 trillion. Many would say that student loans can make your life harder once you graduate. Still, it can alleviate you from having to pay your bills at school. Nevertheless, you must monitor and manage your student loans very well so that you won’t be burdened in the long run.
Tiffany Wagner is currently taking a degree in Investment Management Analysis in her junior year in college. In the context of decision making and business strategy, she focuses on finance and information interpretation.