Off late there has been a change in the trend as more and
more students are opting for student loans private. There are
some students that take private student loans in combinations
with federal aid and there are some that take it as an alternative
to the private student loan.
With the increasing cost of education it is a general tendency that the Federal loan limits should have increased but this is not the case. The Federal loan limits remain the same, as they were ten years before. This is one of the reasons why more and more students are opting for private student loans.
The amount of loan taken by student through private student loans is much
above what the Federal loans have to offer. However these loans
are not used much by undergraduate students and are used in
a good proportion by the graduate and professional students.
Though the number of students for student
loans private does not exceed those taking federal loans
but the amount of loan that is taken is more in comparison to
the federal loans. It is general feeling that if the Federal
loan limits are increased a number of students who are now opting
for private loans would shift over to federal loans.
With student loans private the major
drawback is that the interest on the loan starts accumulating
soon after the loan is disbursed. This would make the interests
keep accumulating till the time the student is in school. After
the student finishes the school and is in a position to pay
back the loan the amount would have reached a value that cannot
be paid easily.
Private students loans are a good alternative to federal loans the
private student loans are a good way to cover the gap that
exists between the federal loan and the cost of education. When
taking a private student loan you can be approved of the loan
fast and the amounts can be a lot more than what you would have
got with federal loans. You don*t have to meet any deadlines
for submitting the application. These loans are given out on
the basis of credit and not on the needs of the student. To
get a lower rate on the student loan you are required to have
a good credit score.
The student loans private
can be taken anytime during the education. You can get the loan
when enrolling for the course or even in mid-term. The interest
rates on the private student loans are fixed. This is another
reason why more people opt for private student loans. But the
interest rates are fixed at prime rates. The prime rates keep
fluctuating every four months and apart from this the lender
also imposes a margin. Apart from the interest rates the private
student loans also claim to have flexible terms for the payments
and thus would be affordable. There is some flexibility in terms
of the repayment period to begin but the lender would not disclose
that the payments are to be made within 15 years of disbursing
the loan. This is almost half the time, which is given for the
repayment of federal loans.
When you opt for private student loans you would be barring yourself from some of the benefits offered by federal loans. Under special circumstances the federal loans provide complete loan forgiveness but in case of private student loans this is not the case. With private student loans you are required to make the payments despite any condition.
When choosing a lender for the private student loans there are some factors that should be taken into consideration.
* While choosing a lender it is very important that you look into the enticements and the benefits the lender has to offer you. Before you start on a deal with the lender make sure that you have asked him about the front and back end benefits. If the lender has front benefits then you can save some cash in the beginning of the loan period. The front-end benefits would typically include a lower amount of origination cost; discount on the interest rates; a negligible or no guarantee fees. If the lender has back-end benefits then you can have a lower rate of interest on every payment that you pay on time or on any consecutive payments and any direct debit payments. Besides if you consider loan consolidation with the lender then you can have the offer of a fixed interest rate.
* There are some lenders who also go in for hiring service agencies who would handle the processing of their payments and the customer services in the secondary market. It is very important that you find out which secondary market does the lender give out his customer service to so that you can assess how is the customer service going to be once the repayment period starts. There are some lenders who would hire a round the clock service provider and these would provide you a complete review of your loan status all around the time. When you select a lender make sure that he has the best customer service provider.
* Defaulting on the loan means that you have not been paying the payments over duration of two hundred and seventy days. To help the students from defaulting there are some lenders who have special programs designed to help the students while there are some who keep giving reminders to students who are near to defaulting on their loan. It is impossible to predict your financial situation after some time when you would be supposed to pay the loan so it is better that you enroll for a loan with a lender who has special services for defaulting.
Before taking a private student loan you should make sure that the lender
with which you are dealing with is reputed and authentic.
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