Private Education Loans
Private education loans or sometimes referred to as alternative loans give students additional options to finance their post-secondary education. As opposed to federal loans, private educational loans are sponsored by banks, lending institutions and are not guaranteed by government agencies. With record number of students making their way to colleges and universities every year and federal agencies stretched to the maximum, these loans have filled the vacuum and provided alternatives to young people all over the United States.
Categories of Loans
A private educational loan comes in different shapes and sizes and can be divided into two separate categories.
- School channel loans
- Direct to consumer private loan
The advantages and disadvantages of both of these categories ultimately depends on the consumer's circumstance. School channel loans are guaranteed by the educational institution and are considered the next best thing after federal loans. While direct to consumer private loans are more readily available. Both of these loans are accessible and can help students in furthering their educational prospects. Loan Facilities
Private loans offer a number of facilities not available with federal loans. The amount available with private lending companies is considerably higher and the process is much quicker as compared to federal loans. Option of private education loan consolidation
is also available that allow students to combine their loans into one to avoid payment hassles. Private loans are flexible and give borrowers opportunity to adjust according to their circumstances. Some of the private lenders give borrowers the same facilities and protection as federal loans and also give them the option of renegotiation. Forethought
A number of lending companies attract borrowers by advertising the best private education loans
. It is recommended that both parents and students use their federal loan options first before turning to private lenders. The federal government has initiated awareness programs through the Consumer Financial Protection Bureau
that are designed to help borrowers with critical information. Rising interest rates is all the more reason to search extensively for the right option before signing on the dotted line.
Frequently Asked Question(s)
Q:Is private education loan consolidation a viable option?
A:If you are getting more than one loan then often the task of managing different loans can become quite a hassle. Every loan comes with its own interest rates and terms and managing them can be inconvenient especially for students. Private education loan consolidation in such situations can be a smart move, but it must be seen that the terms and interest rates are checked beforehand.
Q:Can private educational loans cover boarding expenses?
A:Yes, private educational loans can be used to cover a number of educational expenses. Not only can you pay off tuition fee expenses, but can also take care of hostel/boarding expenses, travelling expenses, book costs, material costs, and other education relation expenditure. These loans are offered by a number of private banking institutions.
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