Private student loans
usually charges higher interest rates. So why choose this loan?
The cost of university education is rising, outpacing the consumer inflation rate. As if families are not enough burdened with the current economy, rising unemployment rates and risks of getting kicked out of their homes, high education costs are putting an even greater burden to their shoulders. The annual education cost could reach over $30,000 at some universities.
Students are always looking for financing to further their education and usually their first and easy option is to take out private student loans. But this article encourages students to make a wise decision and beforehand understanding what the advantages and disadvantages are of private student loans.
The best way to fund your education is by exhausting all options of free money first. Whether it is scholarships or government grants, free money is obviously better than any kinds of loans. The balance remaining after all the free financial aid is factored in is what often forces families to consider student loans options. The best option for student loans is the government-backed student loans with the possibility of consolidating the loans and, later, possible programs for student loan forgiveness. One should always turn to federal student loans first, as soon as all the free financial aid for education has been used up.
When every financing source is exhausted, look into the advantages and disadvantages of taking out private student loans:
The advantages are:
Quick approval process:
Private student loans are usually quickly approved in as little as five business days. The funds will be immediately availabel to the student. Federal student loans, in comparison however, takes years and the processing is usually completed throughout the college.
Financial aids such as scholarships or government grants usually are not enough to cover the whole cost of college education. Private student loans usually can lend you more money than even the government-backed loans. The loan amount you can take out with private student loan companies are limited to $30,000 annually.
Federal student loans are usually more restricted in how the fund is used. Students, however, are allowed to use their private student loans to pay other things such as a laptop.
The disadvantages are:
In order for you to be eligible to get a private student loan, the lender will have to check your credit history. Only creditworthy individuals will be approved.
Higher interest rate:
The best interest rate you can get are usually given by federal student loan lenders. Besides, government-backed loans are usually fixed while private student loans can go up and down each month and are generally much higher.
Although this is also true with federal student loans, private student loans must be applied for each academic year. Therefore, by the time you finish your education, you will have different loans with different interest rates charged over them. The difference is that in the end you will be able to consolidate all your federal student loans but due to new laws, private student loans have been forced out of the loan consolidation business. Therefore, many students now are having difficulties in repaying their multiple private student loans.
No loan forgiveness program: There are student loan forgiveness programs available for students with federal student loans. Unfortunately, students with private loans will not have the privilege to be eligible in getting a loan forgiveness at some point in the future after they graduate.
Now that you know the disadvantages and advantages of private student loans
, you should be able to make a wiser decision for your financial future.
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