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Private student loans can provide educational lending options for people who may not qualify for federal student loans. They can also expand educational funds beyond what federal student loans offer.
Benefits of a Private Student Loan
There are quite a few advantages to consider when applying for private student loans. One of them being is that you can apply regardless of your family situation and specific income limits.
Types of Private Student Loans
You have the option of student loans or parent student loans from most banks or financial institutions. These loans are entirely different and separate from federal student loans, which are offered and granted by the government.
Student loans: Many first-time college students are entering straight out of high school and have little, if any, credit history. If you don’t have sufficient credit to repay the loan, you may need to have a co-signer sign up with you. While you will be responsible for re-paying the loan, if for any reason you default on your payments, the lender may try to recoup their funds from your co-signer. Defaulting on a loan with a co-signer not only impacts your credit, but your co-signers as well.
Parent student loans: Parent loans are set up to be paid by the parents on behalf of the student. The funds obtained from private student loans can be used for any of the following:
- Tuition
- Room and board (including on or off-campus housing and meals)
- Fees
- Computers or laptops for school
- Books
- Supplies
- Transportation
The idea is to borrow enough to cover your needs for the entire school year, rather than going back and asking for an additional loan as the school year progresses. Once the money is sent to the school to pay for your tuition, you may request disbursements from those funds for other school necessities.
It should be noted that Bangor Savings Bank does not offer student loans in the name of the parent, however they do offer loans where parents can be added as co-signers.
Paying Off Private Student Loans
Repaying your private student loans is important. Defaulting on loans can damage your credit score, and any co-signers. A low credit score can impair your ability to rent an apartment or get a credit card in the future, among many other financial implications. Use these tips to help pay off your private student loans as quickly as possible:
- If possible, pay more than the minimum every month. More importantly, make sure the additional amount you pay goes toward the principal rather than simply paying ahead a month. This will offer the greatest benefit and can help shave years off your repayment term..
- • Refinance your loan if your credit and job make you an ideal candidate. This can reduce the term and interest rate, saving you money and years of repayment.
- Make bi-weekly payments instead of monthly. This works great for people who get paid every two weeks from their employers as it allows you to make an entire additional payment each year. Double those efforts by paying a little extra, and you are golden.
Paying off private loans is a priority. Doing so will free up your finances to save for other major purchases, like homes, cars, and more.
Takeaway
- Private student loans offer many benefits to consider over federal student loans.
- There are two primary types of private student loans.
- Repaying private student loans quickly gives you greater financial freedom, faster.
Private student loans provide students with options not available through the Federal Student Loan Program. Do your research and be prepared when choosing a student loan program.
