Thinking to take private student loans? Know the perks and losses …..

Now a days, education is expensive. Though from the beginning to high school, parents do afford the education expenses of a child but as the student pursues college, the education costs increases and they go for taking out loans for continuing the education.

If you are among many who are taking loan, think through the decision and figure out which is best.

There are both federal student loans and private student loans.

If you or your child is eligible and qualified for the federal loans then go for it because it provides benefits like fixed interest rates and potential subsidies which are not available in case of private loans.

In case you/your child is not eligible for one ,you can go for the private loan but first you need to know all about it, shop around and compare rates, terms and conditions.

Private Student Loan – refers to an alternative student loan where the funding is offered by private lenders.

There are 3 types of private loans –

1. Bank loans – Many banks have loan programs which also requires a co- signer . A co-signer is one who would have to pay back the loan if the one who is taking the loan cannot repay it for any reason.
2. School Loans – Some times, many school’s financial aid office arrange loan programs, they generally have fixed rate of interests.

3 . State Agency Loans – Some states sponsor alternative student loans for students who attended a state school.

Perks of Private Student Loans –

1. Private loans offer larger amounts than you could with a federal loan .
2. If you are a co – signer and have good credit, you will be able to get lower interest rates.

Losses of Private Student Loans –

1. Interests on private loans are not tax-deductible and have variable rates which implies that the interest could increase over the life of the loan.
2. There are fewer repayment options for private loans.
3. These generally have higher cost than federal loans and often requires payments while the child is still learning.
4. As written before ,these require a co-signer ,which means someone else has to pay back if the student can’t.
5. Credit score is an important factor for private loans which could mean a more expensive loan or the loan application can be declined.

While deciding which student loans to apply for, take your time and compare rates and find the best, so that when the time for repayment will come you or the student can pay it back without hackle.