What is a Private Loan?
A private, or alternative, student loan is a nonfederal loan made by a lender such as a bank, credit union, or state agency. There are many considerations a student and family should take when deciding if a private loan is the best option for them. Students and parents can use any lender of their choice.
If a student does not have an established credit history, they will likely need a cosigner to apply with them. It may be in the student’s best interest to secure a cosigner before completing a loan application, as multiple applications may result in multiple inquiries on their credit report.
Finding & Researching Private Loans
If you have already taken advantage of federal grants and loans and still find the need for funds, keep in mind the following tips and guidelines when selecting a lender. Always borrow conservatively and only borrow what you need. Students are strongly encouraged to research available lenders and to ask the following questions:
- What is the interest rate? Is it variable or fixed?
- Will I need a cosigner?
- What are the fees associated with taking the loan?
- How will the funds be dispersed?
- When does interest begin accruing?
- When will repayment begin, and what repayment options are available?
- What will my estimated monthly payment be?
- If I am having difficulty making payments, what options do I have?