When you think about your children’s higher studies (college or university), perhaps, the first thing which comes in your mind is the huge debt and financial loans associated with education in our time. The average cost to attend a four-year college can reach up to $10,000 which leaves parents with no choice but to apply for a financial loan from the federal government. But, there are times when federal loans might not help you. During such situations, a private student loan might be the only option left for you.
What is a Private Student Loan?
If you ever happen to need a loan for education, you will come across two different options – Federal Student Loan and Private Student Loan. As you might guess, federal student loans are given by the Federal Government. Unlike federal loans, a private student loan is given by private money lenders, such as banks, credit unions and other financial institutions.
Since a federal student loan has more favourable terms such as lower interest rates, flexible repayment options and no credit check to avail the loan, most people always apply for it. Usually, people apply for a private student loan when a federal loan fails to complete their needs. But, the benefits of the best private student loans often surprises them.
Here are the reasons why a private student loan is the better choice
- With good credit scores, you can borrow as much as you need
Federal loans have a limit to which they can offer you a student loan, whereas, there is no such limit to private student loans. As long as you have a good credit score, you can borrow all the money you need.
If you have applied for a federal loan but still not able to make your ends meet, you can get the rest of the amount from a private student loan. This way a student can fill any financing gap left after federal loans.
- Get rewards for having better credit scores
With private student loans, you will receive some amazing benefits for having a good credit score.
When applying for a federal loan, your credit score does not matter, while for private loans, your credit score is an important metric. Whether your loan is approved or not depends upon your credit score. Do not worry if your credit score is not good enough, you can have someone trustable as a co-signer and get a private student loan.
- Available to international students if they have a creditworthy co-signer
If you are an international student and looking for an educational loan, then don’t be sad if you are rejected for a federal loan. If you have a creditworthy co-signer, you can easily apply for a private student loan without any issues.
- No need to file the Free Application for Federal Student Aid (FAFSA)
Applying for a private student loan is quicker than you would expect it to be since there is no need for you to fill out the FAFSA, which makes the application process quite short.
- An alternative option to Federal Loan for students with bad academic history
Federal student loans consider previous academic results before approving any loans. Due to this, many aspiring students do not get an educational loan and are not able to continue studying. For such students, private student loans are a blessing. Past academic records do not matter for a private student loan.
- Good credit score can lower interest rates
Having a good credit score can lead to lower interest rates. In the case of federal loans, interest rates are fixed and the same for everyone and aren’t affected by credit scores. Even if you don’t have a good credit score, you can ask someone creditworthy to be your co-signer and, thus, enjoy low-interest rates on your loan.
Conclusion
Federal loan is the most popular loan for education but many people still do not know about the benefits of its alternative option, private student loans. Compared to federal loans, private loans have a quicker process, easier to get and available to anyone. You can find many private loan lenders nearby or find them online. Always check the terms and conditions before applying for a loan anywhere.