Four restrictions that can limit your private student loans

So financial aid didn’t come through the way you had hoped. Don’t sweat it.

a metal padlock protecting locking two wooden doors outsideThere are more students funding their education through borrowing than there are paying out of pocket, and there’s nothing wrong with that.

Though you may be tempted to accept the federal loans that are initially made available to you, we encourage you to research your options and think outside of the box.

Private loans have helped students obtain lower interest rates, and alumni consolidate their borrowing post-graduation. There are restrictions that keep private loan(s) from being as effective as you anticipated, and we’re here to help you avoid them.

Say goodbye to income-driven repayment plans or loan forgiveness. Private lenders do not offer services that protect you the way federal loans do. They are “until death do you part.” Be wise about your borrowing amount and make certain that you can meet the agreed upon payment schedule. If you’re going to spend the next few years paying thousands of dollars in debt, then you might as well make it enjoyable.

Phone a friend

Many private loans allow the option of co-signing with a trusted family member or friend. This may sound like a good idea at first, but your parents may grow tired of co-signing on your apartment, your car, and now your student loans. At this point, your credit may not be high enough to sign on your own. Private lenders typically consider your entire financial history as part of the application process. We’ve all made mistakes, but that ongoing credit card bill may actually cost you.

Know thyself

There are additional realities that may restrict the usefulness of private student loans. Some loans, for example, require residency in a specific region. Others are designed for specific academic statuses and classifications. You will want to read the fine print of each loan before moving forward with it. You might as well verify that the lender meets your eligibility requirements while they are doing the same to you. You want what’s best for your wallet and your education.

Lack of knowledge

Private loans can be, well, private. That means you’ve got to do the research of finding the best one on your own. Visit the local banks and financial institutions in your college’s town and make them aware of your desire to borrow. Move on to your hometown and do the same. You can also browse the web and compare private loan offerings. Regardless of how many loans you find, you can’t know what you don’t know, which means that you’ll never know if you missed out on the one loan that could have saved you that much more money.

And there you have it: Four considerations to keep in mind as you consider investing in a private student loan. We want the best for your academic and financial well-being, and you can’t have the best without awareness of the worst. Keep these nuggets in mind and you will fund your education with wisdom.

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