Myths and Fallacies of Private Education Loan Borrowing
Michalis 'BIG Mike' Kotzakolios
College is an enormous expense. Often you hear parents and students ask, ďHow am I going to pay for this?Ē There are many different types of financial help available to those who donít have thousands of dollars in cash under their mattresses. The private education loan can be an excellent resource for paying for an education. However, there are a few misconceptions about student loans.
Some people think that in order to get a loan, the student needs to put up some kind of collateral. The truth is that this is not the case. In fact, the private education loan is most often an unsecured loan.
Because the private education loan is not federally funded, your credit will be considered when trying to qualify for the loan. Another misconception is that you must have perfect credit to qualify for one. This is also not the case. You can have imperfect credit, even no credit, and still qualify. If you are unable to qualify on your own merits, a co-signer such as a parent can assist. Keep in mind that if you do have imperfect credit, you will have to pay a higher interest rate, possibly even loan fees. However, if you pay your student loan on time every time, it will help rebuild your credit.
Also, many people think that having a certain level of income automatically disqualifies them from qualifying for a private education loan. This is not the case either. Student loans can cover more than just tuition and books. They can finance things such as living expenses, computers, meal plans, and just about anything else related to the pursuit of an education. Even if you donít qualify for federally funded loans because your income is too high, you may still qualify for a private education loan.
There is no deadline to apply for a private education loan. Unlike federally funded loans that have a deadline to get a loan for that year, private education loans have no such limitation. You can apply anytime and find out within minutes whether or not you have been approved. Also, with the private education loan, the money is sent directly to you. You can disburse the money as you see fit in order to pay for your education and related expenses.
Students think that they wonít be able to afford to make payments on a private education loan while in school. In general, lenders of private loans will defer the payments until you are out of school. Private loans, just like federal loans, recognize that college students might not have the resources to pay the loans back while they are in school.
When applying for a private education loan, you neednít limit your search to just banks or credit unions. Many different types of lenders offer private loans to finance educational needs. Be sure to compare the different lenders to see whose terms are most advantageous in your particular situation.
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