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Student’s Guide to Applying for Private Student Loans
Even for students who have secured scholarships or financial aid, more money may be required to fill in the gaps. If you plan to apply for private student loans, you should understand the process and how it differs from federal student loans.
Understand Private Loans
Unlike federal student loans, eligibility is based on your credit profile. Private school loans are offered by banks, online companies, and credit unions. The loan process is similar to any other loan.
Research the financial institution before you fill out a loan application. You will want to compare rates and terms to ensure you are getting the best deal. Most financial institutions will have a pre-qualification portal online that will help you find information about interest rates, loan terms, and repayment options. The pre-application check should not affect your credit score.
Get Your Paperwork Together
Before you start your search for a lender, compile the necessary documents and other paperwork. Be sure to include your social security number and other personal information, your most recent tax returns, and information about any assets or other potential collateral. Be sure to have a copy of recent pay stubs or work invoices if you are self-employed.
You will also need information about the school you wish to attend and the tuition costs. Be sure to include any additional needs when you get ready to apply. Unlike federal loans, a private loan will enable you to borrow enough money to cover expenses beyond tuition.
You will need to fill out a form called Private Education Loan Applicant Self-Certification. In 2010 the federal government made the completion of this form a requirement. The purpose is to give you an accurate idea of the amount of money you will need to borrow.
If Needed, Talk to a Co-signer
As a student, you may not have the credit to apply for a student loan. According to MeasureOne, during the 2019-2020 academic year, 92 percent of undergraduates required a cosigner to take out a private student loan. On the graduate level, 62 percent of students required a cosigner.
If you have a lower credit score or if your income is low you may need to ask someone with more established credit to sign the loan with you. This means if you default on the loan the cosigner will be on the hook to repay it. The cosigner will also need to present personal and financial information for the loan application.
You can apply for a private student loan at any point during the academic year. If you plan to submit multiple applications, be sure to time the applications within thirty days of each other. The point is to limit the impact on your credit score. Multiple inquiries can result in a lowered score.
You should also be sure to begin the process around two months before school starts. You will want to make sure the loan process is finished around thirty days before you are set to begin classes.
File the Paperwork
At this point, you will submit your application for the loan. The paperwork you have compiled will help make the process smooth. Most applications require personal information, financial information, and school information. You will need information about your graduation date and the desired length of the loan.
You may have an answer back within a short time after the application is submitted. Some financial institutions will have an answer the same day. Others may take up to a week to give you an answer.
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