After you have made use of subsidized and unsubsidized federal student loans, private student loans can help pay for remaining school costs. Private student loans are provided by banks, credit unions and online lenders, and unlike federal student loans for undergraduate, they require a credit check.
In this article, we have compiled a list of the best lenders and tips to help you compare and obtain the best private loan option as a student.
Table of Contents
What is a Private Loan?
A private loan is basically a loan you get from a non-government lender. This can be a bank, credit union, online lender, or even a wealthy individual [1]. The key difference between private and government (federal) loans is the lender and the terms.
Here's a breakdown:
- Lender: Federal loans come from the government, while private loans come from private entities [2].
- Terms: Federal loans typically have set interest rates and repayment plans with benefits like income-driven repayment and forgiveness options. Private lenders set their own terms, which can be more flexible but also may have higher interest rates and fewer borrower protections [2].
Private loans are sometimes used for student loans, but they can also be used for other purposes like consolidating debt or making a big purchase.
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How Do I Choose a Private College Loan Online
You need to compare offers from multiple lenders including banks, credit unions, online companies and state-based lenders to find the lowest interest rate. With respect to the lender, you may be able to choose a fixed or variable interest rate. A fixed rate remains the same throughout the life of a loan.
A variable rate may start out lower than a fixed rate, but could increase or decrease as time goes on depending on economic conditions.
It is advisable you consider any borrower protections your private lender offers, including deferment and forbearance, as well as other payment options. You can also have the option to select your loan term, which means you could pay off your loan faster and with less interest by making higher payments or pay lower amounts with more interest over a longer period of time.
Best Private Student Loans
Below is a list of the best private loans you can consider as a student.
- Sallie Mae Undergraduate Student Loan - Best for Private Student loan
- College Ave Private Student Loan - Best for Private Student and Part-time students
- Ascent Credit-based student loan - Best for private student loan
- Custom Choice Loan - Best for Private Student Loan
- Education Loan Finance Private Student Loan - Best for Private Student Loan
- Earnest Undergraduate Loan - Best for Private student Loan
- SoFi Undergraduate Loan - Best for Private student Loan
- MPOWER Private Student Loan - Best for International Students
- Funding U Private Student Loan - Best for Private Student Loan
- LendKey Private Student Loan - Best For Private Student Loan
- College Ave Graduate Student Loan - Best for Graduate School
- Ascent Non-Cosigned Student Loan - Best for No Co-signer
- ISL Private student loan - Best for Parent loan
- Edly Non-Cosigner student Loan - Best for Income Based Private Loan
How Do I Qualify For a Private Student Loan?
It is of no doubt that each Lender will have its own requirements for taking out a loan. Credit score and income are taken into account for most student loans. Higher credit scores are incomes tend to get the best rates and are more likely to be approved for higher borrowing amounts.
Since undergraduate borrowers are less likely to have established credit or income, lenders will usually prompt students to apply with a co-signer. Some lenders who have loans for borrowers without a co-signer will consider academic performance and income potential.
Can I Get a Private Student Loan With Bad Credit?
If your credit is poor, it will be difficult for you to get a private student loan from a bank, credit union, or internet lender. Federal student loans are your best bet if you have terrible credit because they don't require borrowers to prove their creditworthiness. If you apply with a co-signer who has good credit, usually with scores in the mid 600s or above, you might be able to obtain a private student loan if you've previously exhausted your options for federal loans.
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How Do I Apply For Private Student Loan?
Each Lender will have its own application requirements. Most at times, you will have to provide documents that prove citizenship, identity and income along with school information, like cost of attendance or the financial aid award letter from your college.
As part of underwriting, you or your co-signer will need to show you have a credit score in the high 600s or higher, as well as cash flow to make loan payments. They’ll also look at your or your co-signer’s debt-to-income ratio to make sure you have the funds to pay a student loan bill in addition to any other bills in your name.
Final Thoughts: Best Private Student Loans
Selecting the right private student loan can significantly impact your financial future. It's crucial to compare your options carefully, considering interest rates, repayment terms, and borrower benefits. Sallie Mae, Discover, Citizens Bank, College Ave, and Earnest are among the top choices for 2024, each offering unique advantages depending on your financial situation and needs. Always remember to exhaust federal student loan options first, as they typically offer more favorable terms and protections.
Before making a decision, use loan comparison tools and speak with financial advisors to ensure you choose the best loan for your educational goals and financial health.