Choosing a Private Lender

If your federal student loans are not going to cover the costs of your education then you will need to look for private loans to cover the rest. Private loans can vary greatly from lender to lender and you will need to decide which lender is offering the best terms and conditions for you. Here are some things to consider when selecting a private lender for your student loans:

• How long will the process take: You are going to want the funds from your loan before classes start, so find out how long the application and distribution process takes for the lender you are considering and determine if they can get your funds to you in time.
• What are the benefits: Some lenders offer incentives, like cash back for on time payments, lower interest rates or longer terms. Determine what benefits each of the lenders you are considering have over the others. This is an area of interest that can save you a lot of money in the long run and on your monthly payments when you start to pay your loans back.
• Will they sell your loan? Some lenders may sell your loan to other institutions, this will mean dealing with a new lender, but should not change your terms and conditions.
• Will the interest be capitalized: Some lenders will capitalize the interest accrued on your loan before you are scheduled to begin repaying the loan. This means that the interest gained during the period while you were in school becomes a part of the balance of your loan and new interest is gained on the total of that balance. Capitalization can occur multiple times with some lenders, make sure you choose a lender who capitalizes interest only once during the lifetime of the loan if possible.
• Do they have a hardship policy? Because you may not always find a job right out of school you might want to make sure that the lender you choose has a forbearance policy that is flexible enough that you can wait to make payments until your finances allow.
• Options for repayment: You will want to make sure that your lender will offer graduated repayments or consolidation options. Graduated repayment offers payments that increase with your income. These will help you manage to repay the loans within your budget, paying off larger amounts as your income increases.

When searching for the right lender to get your private student loans from it is important to remember that you are in charge of your options and your future, there are plenty of lenders out there to get into contact with and each will have different terms, conditions and benefits. You should also consider how you will repay the loans in the future, how easily they will be able to be refinanced and consolidated if that becomes necessary and how willing the lender might be to work with you. Examine the advantages of having a student loan on the next page.