Some private student loans go into default nearly as soon as you miss a payment.
The interest rate and monthly payments on a government-guaranteed loan can vary depending on the amount borrowed and your credit score.
Private student loans are different from federal loans, in part because private lenders can take advantage of federal loopholes to keep interest rates low.
You might have to repay private loans sooner than if you borrowed through the government.
Private student loan interest rates can be higher than their federal counterparts but usually students are able to refinance school loans a lot easier.
There’s no guarantee that a private loan you take out will be forgiven after you graduate. Private lenders tend to be more aggressive in charging fees, and there are penalties for not meeting your payments.
If you’ve decided that you want to go the private path, here are some things you should know about what it takes to get started.
Private student loans: What you need to know
If you want to go private with your loans, you’ll have to take out loans through a private lender. There are many of these lenders, with varying types and interest rates. Find the best loan for you.
What you need to know
You’ll have to start by applying to a few schools. You’ll have to pay a certain amount of money to apply and you’ll have to show proof of a good credit rating and to have at least $1,500 in your bank account. These requirements vary depending on the school.
If you don’t qualify for a loan, you have to work on getting it.
If you have an unearned income of $1,000 or more a year, you will not be eligible for student loans from the U.S. government or most private lenders. If you have a job and earn less than $1,000 a year, you can apply for a loan, but you can’t expect it to go through. It will most likely need to come from a private lender.
Students who have a private student loan are not eligible for a Direct Subsidized Loan.
There are two types of Federal Direct Student Loans. The first, Federal Perkins Loans, allow students to use the full amount they borrowed for college. The second, Direct Unsubsidized Loans, allow you to borrow as little as $5,500, but may have an APR.