Comparing the Pros and Cons of Private School Loans

When trying to come up with money for college, private school loans could be an option to consider. When federal student loans are not enough, private school loans can pick up the slack. Here are some of the pros and cons associated with private school loans.

Pros

  • Money restrictions-- One of the big advantages of going with a private loan is that it does not have very many restrictions on how you can use the money. They will confirm that you are going college, but they usually do not care how you use the money. Therefore, you could pay for tuition, but you can also pay for books, room and board, transportation, computers, or anything else that you may need while in school. This gives you a lot of flexibility and can provide you with the resources needed for college. It can also help you avoid having to work a job while in college.
  • Many options-- Another advantage of working with private lenders is that you have many options before you. When you work with federal loans, you only have a few programs to choose from. With private lenders, there are numerous programs to consider. As a borrower, having more options is always a good thing. It allows you to shop around for the lowest interest rate and the terms that you want.
  • Larger loan amounts-- Going with a private lender also gives you the ability to get larger loans. Many federal loan programs may have restrictions on how much money you can borrow. Therefore, if you need a large loan amount, this may not be possible. There are many private lenders out there that are willing to loan large amounts of money. Therefore, shop around and you should be able to find a loan that accommodates your needs.

Cons

  • Credit-- One of the downsides of using private student lenders is that the loans are dependent upon your credit. Therefore, you will have to show some signs of credit worthiness in order to be approved. This eliminates a large percentage of the general public. As a result, you may have to find a cosigner that has good credit. Many students that are approaching college-age do not have any credit built-up yet. This makes it difficult to get approved for a private loan on their own.
  • Income-- In addition to checking your credit, they will also want to make sure that you have some sort of income. If you get a cosigner, this could be based upon your cosigners income. However, they may want to see that you have some sort of income or income potential for the future.
  • Deferments-- One advantage of going with federal student loans is that you can defer payments until after graduation. With private student loans, this may not be an option for you. Many private lenders require some sort of payment while you are in school.

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