More often than not, federal student loans are not sufficient to cover your college or grad school expenses. Do you know your other options, if you have exhausted your federal student loan? Yes, personal loans are one of the common options students look for to cover their college expenses. However, personal loans can sometimes turn into your deadliest nightmare with their complex terms and high interest rates. So, it is important for you to have a better understanding of these loans before you take one. Here, we talk about a few important things you must know before taking a personal loan for your school or college expenses.
- There Are Tools For Comparing The Best Personal Loan Deals
The first thing you need to know is that you have access to reliable tools for comparing different options. There is no dearth of institutions extending personal loans for students. And all of them have different terms and conditions for their services. It is not practically possible for you to check and compare each of the options manually. So, the best option is to use those online free calculators for comparing different options of personal loans for school.
- You Might Need A Co-Signer
Obviously, you are taking the loan to cover your college expenses and you honestly intend to pay it back. But most of the institutions need a guardian to share the legal responsibility for your loan. So, before you apply for a personal loan, you need to discuss your plan with your parents. Almost 90% of these financial institutions will turn down your loan request if you don’t have an adult co-signer. It will really be difficult for you if you don’t find an adult who is willing to share the responsibility for the full-term of the loan.
- Co-Signer Release Gets Approved In Only 1% Cases
Co-signer release is a process by which the co-signer is relieved from his/her responsibility of the loan. You become eligible to release your co-signer after making on-time repayment for 12 to 24 consecutive months depending on the terms of the loan. However, in 99% of the cases, the request to release the co-signer is declined by the financer. So, in the first place, don’t make any such promise to your co-signer that you’ll release him/her from the responsibility of the loan. The co-signer must be ready to take the responsibility for the entire period of the loan. If you wish, you can also discuss the matter with your finances before getting the loan.
- You Don’t Get Much Repayment Options In Personal Loans
Before signing the agreement for your personal loan you must figure out your repayment capabilities. The federal student loans come with varieties of repayment options such as income-based repayment, deferment, forbearance, and even loan forgiveness in certain cases. You cannot enjoy such flexibilities with student loans. So you must figure out how you are going to repay the loan before applying for the same. It is important because if you don’t repay the loan on time, your credit score will be affected badly.
- Interest Rates On Private Student Loans Need Not Be Fixed
The interest rates of a federal student loan are fixed but same is not the case with personal loans. Some personal loans have fixed rates while the others may charge variable rates. If you choose a loan just by seeing its low rate of interest and without knowing other terms and conditions, you may get into trouble. A variable interest rate is typically low at the beginning but gets higher later. So, make sure you know whether the interest rate will be fixed or variable before signing an agreement.
There May Or May Not Be A Grace Period
Generally, the federal student loans have a grace period for repayment. Suppose you get a 6-month grace period, you’ll have to start repaying your loan only after 6 months of graduation. But, if you don’t have a grace period, you’ll need to start repaying the loan immediately after your graduation. If you think you cannot do so, you’ll need to search for a personal loan that can offer you a grace period. A student loan without grace period can badly affect your financial condition if you don’t get a good job as soon as you complete your school.
There are lots of things to consider before taking a personal loan, but you need not feel scared about it. See this as an opportunity to take charge of your financial decisions. A student loan is your first chance and from now onwards you’ll have to take all such important financial decisions on your own.
