How to Choose Student Loan Lenders

The dilemma many students faced in choosing a student loan lender to provide their federal student loans has now been removed. The system has been simplified so that all new applicants for federal loans are issued with loans directly from the department of education which has resulted in the loans carrying lower fixed interest rates. All students should complete the FAFSA to apply for federal student loans which are the cheapest method of borrowing available to finance college.

Whilst students are encouraged to apply for scholarships and grant funds in addition to federal student loans, many students still have a shortfall between available funds and the cost of attending college. In this situation private student loans become a necessity and it is important to research your lender well, rather than just sign up with the first one. You should always compare the different loans on offer from private lenders and there are many considerations which should influence your decision.

Private student loans are not offered on such favorable terms as federal loans and the APR should be taken into account. However the lowest APR does not necessarily represent the best deal as it is important to research the type of charges which are attached to the loan too.

Avoid any loans which charge any kind of penalty for overpayments or early settlement of the loan. Look for other charges such as origination fees and application fees as these will add to the total cost of the loan. Consider any related benefits which the loans have such as a reduction in the APR if you pay by automated debit payments.

In addition you should consider repayment terms such as the length of the loan and related charges if you need to make changes later on. Consider if you are required to make interest payments on the loan whilst in school and if these would be affordable. Many loans give the option of deferring interest until after graduation but you should always bear in mind that the interest will continue to accrue and thus add to the total cost of the loan.

You will not be able to obtain a private student loan without a responsible co-signer unless you have an excellent credit score of your own and an established income. If a co-signer is required then check how soon they may be released from this position under the terms of the loan. The credit rating of your co-signer can also influence the interest rate you are offered on the loan.

As student loan defaults continue to rise it is important to research what kind of assistance your loan provider would offer if you had future difficulty making loan repayments. Many private student loan packages do offer a chance of forbearance but consider at what cost, as some lenders charge a fee for this option. Also consider what consolidation schemes they offer.

Private student loans are an expensive way of funding college, so always try to obtain the necessary funding from other sources first and treat private loans as a last resort. Never borrow more than is strictly necessary and have some idea in mind of how you plan to pay them back. Those who are able should start to repay the interest whilst in school to stop the loans increasing, and overpayment towards the principal is an excellent idea whenever funds allow.

The key thing to remember if it is necessary to utilize private student loans is to comparison shop well, keeping each of these points in mind, and never just settle on the first student loan provider suggested. Always look at the total cost of the loan including fees and consider the worst case scenario of having repayment problems in the future and what assistance would be available from the lender.