Private Loans as a Student Loan Option
Considering Private Loans for your student loans
Ideally you don't want to have to have any loans just to be able to attend college, but the truth is many do need extra help for college. It makes sense when you consider the cost. Not all loans for college are federally based, so you want to consider everything when making your decisions.
Most banks offer private loans that are not really that different from federal programs. One good thing is about private loans is that often you can borrow more than you would be able to with a government loan. Other needs in life don't just go away during college, so if you need money you can take the private loan route for other needs too. Just plan to pay them off as soon as you possibly can, as you don't want to feel trapped for years to come. Below are some things to consider regarding private loans.
Some Private Loan options
Different banks and financial institutions are in the business of loaning, and help for college is no different. Since these are considered private loans though, the terms are set by the individual lenders instead of the government. So you want to familiarize yourself with those terms. Some opt for this idea once they have exhausted all the possible federal options available to them. Being private bank loans, you can apply any time of the year. Some examples of these include Chase's Education One Loans, or Sallie Mae's Signature Loans. Just apply for these and others directly with your bank or financial institution. This is where your personal credit history can come into play, as they often base your interest rate on what your credit score is. Better rates are for the better scores, which makes sense.
Some of these kinds of loans allow for payment deferment on payments of interest and principal. They will allow for deferment until after you graduate very often. The main things you want to consider when looking at private loans are the interest rates, loan terms, borrower benefits, and repayment options. Compare these things to others.
Supplemental Loans for Students and other possible options
Supplemental Loans for Students (also called SLS) are private loans also often available through banks, credit unions, savings and loans, and other financial institutions. They sometimes go by other names, so ask about that when looking around. You will find that both undergraduate and graduate students use this option as needed. They do have a maximum amount to borrow each year. Usually is it around 4,000 dollars per year. You usually begin to pay it back about six months after you graduate, allowing for some time to get settled.
Using Home Equity is another option if you own a home. In short, this allows for the tapping into the equity of your home to help pay for college. Borrowing a lump sum, also known as a second mortgage, is one option and you pay monthly for that. It helps to establish credit and you can borrow money as needed. You can pay on the amount you actually borrowed instead of a bigger lump sum.
There are some advantages you can deduct the interest from your taxes with a home equity loan. Borrowing only what you need, as you need it, helps in not impacting your assets as much. This is better than doing one bigger lump sum.
It is recommended to avoid a second mortgage, as it can impact you qualifying for further financial aid. If you are trying to decide which is best, whether a second mortgage or a home equity line of credit, weight all things out carefully. You want to consider the impact of receiving the money and the impact it will have on your financial aid.
Other ideas include borrowing from your whole life insurance policy, or dipping into your IRA. Some have considered dipping into their 401k plans, but its not advisable.