What are Private Loans?
Private loans are an alternative way for students to pay for educational costs. They are often used to supplement a student’s personal contributions and/or federal loans, grants and scholarships for college. Typically, rates are higher than federal loans and it is often best to seek out federal funding before taking on private loans.
Advantages of Private Loans
Despite the higher rates, private loans do offer several advantages over federal loans. Primarily, the process for obtaining this type of loan is simpler and faster than others. There are typically few, if any, qualification guidelines for income, credit and other financial history. This makes them a good alternative for people who have poor or limited credit history.
Where do Private Loans Come From?
Unlike federal loans, which are issued by the government, private loans can come from several different institutions including credit unions, banks, state run agencies, and from the educational institution that the student is attending. They can also be issued by individuals who are not associated with an institution. This can include a neighbor, friend, relative, etc.
Who Should Apply for Private Loans?
While federal loans are typically the first line of defense when it comes to covering college costs, there are several scenarios when private loans can make a good alternative, including:
- If you don’t qualify for any federal loans, private loans can make it possible to avoid putting your education on hold while you gather funds.
- When you qualify for federal loans, but they aren’t enough to cover all your expenses. In this case private loans can be used as a supplement and help you to get all the classes you need without having to delay school.
- For some, private loans make sense because their future career path is likely to give them a relatively high income shortly after graduation which will allow them to handle the loan repayment schedule.
When Should you Apply for Private Loans?
Typically, as with any lending situation, it is often a good idea to apply for a loan as soon as you know or think you will need one. If you suspect your federal loans, scholarships or other sources of tuition funding will not cover all of your expenses, get the private loan application process started to ensure you have enough time to gather documentation and other resources as necessary.
If you have little, poor or no credit, a cosigner may be required and can greatly improve your chance of getting approval. Qualifications and approval timelines for private loans will vary from one lender to the next, but with Mortgage Solutions Group you can often get approval within minutes from our online application or by calling us at 1-888-233-6164. Our knowledgeable brokers are here to answer general questions and help you get on the fast track to loan approval today.