Reviewing Private Student Loans
When the term, ‘private student loans’ is used, it refers to funds that are provided for study purposes by a private lending institution and not the government. While you will normally have to be officially enrolled in a study course to make use of student loans, there may be situations where you’ll be able to use private student loans after you have graduated.
Before taking on any type of private (or government-funded) student loan, it’s important to know how they work and the advantages and disadvantage are of using them.
Generally, it’s recommended that you seek out as many options as possible with regards to government-funded student loans before even considering the option of obtaining private funding.
Several government loan options have a number of advantages associated with them that would otherwise not be available in the private loan sector. While trade-offs are to be expected where government student loans are concerned, you will normally still be far better off using these instead of various private loans. For example, upon graduating, you may have to work for a year or two in a community service or other public setting.
It also goes without saying that you should borrow as little money as possible when applying for any student loans. These loans are relatively easy to obtain, especially where government-funded loans are concerned. However, you must keep in mind that every penny you borrow will need to be repaid at some stage, and this often proves to be more difficult than most individuals realise – especially until such time as you are able to earn a decent salary.
Other Aspects of Private Student Loans to Consider
The two main factors that that will affect the type of loan that is being applied for are:
- Qualifying for the loan that is being applied for
- Amount of funding that is available to loan applicants
Government student loans are quite easy to apply for and obtain because you will not normally need to provide proof of income or even have a good credit history. Provided that you are enrolled in a course or program of sorts, the government will normally be willing to provide you with a student loan.
When dealing with private student loans, a good credit history will often be needed. As a student, you may not have been able to build a good credit history yet – making it almost impossible to obtain a private loan unless you’re willing to work with a reliable co-signer.
Although government-funded student loans can often be obtained fairly easily, they may sometimes not be able to cover the cost of the course you want to enrol in. There will normally be a limit with regards to how much you’ll be able to borrow from the government though, meaning that there might not always be enough money to cover additional incidentals such as books, accommodation and other fees that are required from time to time.
If you’re studying at a private university or college, or you’re an international student, you will often require far more funding than any government loan program is able to provide. However, you will usually be able to borrow a larger sum of money if you’re willing to apply for private student loans.
- A student loan from a private lender does not come from a government program.
- THey are usually quicker and easier to apply for, and UK direct lenders can be compared online.
- They are typically used to top-up a government loan, for consolidation purposes or for repaying debts.
Additional Differences to Consider
A few additional differences exist when comparing government student loans and private student loans. In most cases, lower interest rates will be charged on government loans than on private student loans – and repayment terms tend to be more flexible as well.
Private student loans on the other hand, are provided with variable interest rates. This can make it difficult to determine exactly how much your monthly repayments are going to be once your studies have been completed.
Terms associated with consolidation and/or refinancing will also differ according to whether you’ve obtained government or private student loans. In most cases, private loans can be refinanced, while government loans can be consolidated instead.
Sometimes, you may only be able to cover the full cost of your study course by obtaining a range of private student loans. However, you will normally have to be enrolled at least in a half time capacity in specific types of programs or courses if you intend qualifying for government student loans. Another point to consider is that government student loans might not always be available for the courses you’d like to enrol in.
Money will also be required after you have graduated to cover expenses such as completing licensing programs or obtaining the required certifications so that you can start working in your field of study. You will also need funds to live on if you’re required to complete an internship as part of your curriculum. In situations like these, you may have to consider the option of private student loans as a means of covering these additional costs.
Minimal Paperwork needed to Apply for Private Student Loans
Another aspect that differs between government and private student loans is the amount of paperwork and information that needs to be provided at the time of application.
When applying for government student loans, a large amount of paperwork will not only need to be filled in; you will also be required to provide information about your family and its financial history. If you’re fortunate enough to have someone co-signing your private loan, his or her personal and financial information will also be needed.
Many families don’t feel comfortable sharing their personal and financial information in this way, meaning that they won’t be keen to apply for any private student loan funding.
Private student loan applications will not require nearly as much personal information to be shared as when applying for government funding. This is one of the aspects that make them more appealing than government loans. However, private loan applicants will need to be able to prove that they have the means to repay the loan within the predetermined time frame – or have a co-signer that’s willing to take on this responsibility.
There may be instances where government student loans are provided with unique benefits that private lenders don’t offer – meaning that it may sometimes be worth your while to spend the extra time filling in the required paperwork.