If federal student loans, scholarships, and grants don’t cover all of your college expenses, private student loans can help fill the gap. However, not all private student loans are created equal. Credit unions and banks may offer different rates and terms. Choosing the right private student loan is crucial because it can impact how much you’ll ultimately pay on the loan.
Let’s take a look at three major factors you need to consider before taking out a private school loan – so that you can minimize your student loan debt as much as possible.
Need a Private Student Loan?
If you’re looking into private student loans, TwinStar can help. We’ve partnered with Sallie Mae to provide you with options to cover your education costs – whether you are an undergraduate student, graduate student, or parent.
Our private student loans feature:
- Competitive rates
- Multiple repayment options
- No origination fees
- No prepayment penalty
For more information about our private student loan options, visit our student loans page.
How Much Money Do You Need to Borrow?
Before you apply for a private student loan, determine how exactly how much money you need to borrow. Doing your homework (see what we did there?) will save you in the long run. Because anything you can do to minimize the amount of debt that you’ll have post-college is huge.
Determine how much money from scholarships, grants, and family assistance you have. Then consider your tuition, housing, books, and expenses. This should give you an approximate idea of how much money you’ll need to borrow.
Remember, the goal is to only borrow what you need. You’ll thank yourself later when the time comes to start repaying your loan.
3 Factors to Consider When Choosing Private Student Loans
Evaluating private student loans extends far beyond finding a low interest rate – even though that’s important. Here are some key factors that you need to consider when you are comparing private student loans.
1. Repayment Options
You’ll want options for repaying your loan. It basically comes down to this: do you want to start paying it off while you are in school? Or postpone payments until you are done with school?
Making payments while you are in school can reduce the total overall cost of a loan because you’ll be paying down interest sooner. However, it may be challenging to make payments while you are in school because of all your other expenses.
Try to find a loan that offers different repayment options, so that you can choose one that best fits your needs.
2. Repayment Terms
This is the amount of time you’ll have to pay off the loan. Choosing a longer repayment term can enable you to manage your monthly payments better, but the loan will be more expensive overall. On the flip side, paying off the loan sooner will result in a lower overall cost, but your monthly payments will be larger.
Repayment terms vary, and while some credit unions and banks may allow you to choose your repayment terms, you might not always have that choice.
3. Interest Rates
Yes, we previously said interest rates aren’t the end-be-all when it comes to private student loans. However, they do impact how quickly the balance of your loan grows and the overall amount you will owe.
Credit unions and banks disclose their interest rate ranges. Your exact rate will depend on your credit (or co-signer’s) history and other financial details. If you can, get prequalified for a student loan. This allows you to see interest rates and loan terms without impacting your credit score.
And speaking of interest rates, it’s important to understand the difference between fixed and variable interest rates. While a fixed interest rate might seem high at first, it will stay the same throughout your loan term. That can help when it comes to planning your payments. Whereas variable interest rates can change over time and increase your loan costs.
Choose a Private Student Loan That’s Manageable for You
When it comes to college, you will have a lot on your plate. Choosing a private student loan that offers you more flexibility can help alleviate some uncertainty. Whether you choose to repay your loan while you are in school or not, make sure you end up with a monthly payment that you can afford.
So, take your time researching private student loans. Find ones that best meet your needs and go from there. With the right loan, you can reduce the amount of student debit you’ll have and repay the loan on time – or sooner!