Overwhelmed by the private student loan process? Conquer the world of private education loans with our informative guide on the steps you need to take before embarking on your college career.
Step one: Obtain a vopy of your credit report
Begin the private student loan process by obtaining a copy of your most recent credit report. Since private loans are based on your credit score, this will give you an indication of where you stand and what you are likely to be approved for. It also provides you with the opportunity to address any mistakes or discrepancies you might notice before beginning the application process.
Request your credit report as early as possible. Doing so will allow you some time to improve your score if necessary. Repairing credit problems is always important, but can especially make a difference when applying for education loans.
Step two: Compare lenders
Start comparing different lenders and the types of new student loans they offer. Are there fees associated with the loan? What interest rate is being offered? What other benefits does this lender provide? Does the lender offer loans designed for specific fields of study? Do they offer programs that your intended school participates in?
Step three: Gather essential documents
Find out what documents and information are required to process your loan application. Gather all essential documents early and keep them in one place; staying organized will make the application process faster and smoother. It is also a good idea to keep copies of all documents and applications. Electronic copies are good, but hard copies are necessary to have in case anything happens to your computer or hard drive.
Step four: Fill out the FAFSA
Many private student loan companies, though not all, will require you to fill out the Free Application for Federal Student Aid (FAFSA). Even though these pertain to loans provided by the Federal Government, private companies use much of the same information provided on the FAFSA in the approval process. Once your FAFSA is processed your Expected Family Contribution (EFC) will be calculated; this figure will help determine how much your family and you are expected to contribute and what the Federal Government will provide. Now that you know what your EFC is you can…
Step five: Scrutinize the numbers
Apply for the correct amount in private student loans. Pay close attention to the borrower limits set forth by the loan company. If you are going to need more than the maximum amount allowed, you may need to take out more than one loan and use more than one lender. Keep in mind; some lenders have minimum requirements for loan amounts. If it turns out you do not need that much in private financial aid, choose another lender with a lower minimum—the last thing you want to do is borrow more than you absolutely need.
Step six: Stay on top of things
Talk to your loan officer and find out long it will take for you to get approved. Since schools have different deadlines for payment, make sure your application is processed and the funds disbursed before your school’s deadline. If the loan can't be processed in time your loan officer may be able to help secure an alternative loan that suits your needs and will be approved before the deadline.
The way private loans are disbursed varies from one company to the next. In some cases the money is sent directly to the borrower in the form of a check. Other loans are sent to the school and require the borrower to sign a disbursement check or agreement. Figure out the details and avoid having a loan check waiting in your school’s financial aid office for your signature.
The method of disbursement is also very important in relation to the deadlines set by the school. Ask the lender if your loan will be in the form of one lump sum or spread out as multiple payments during the academic term. If the payment schedule does not match the school’s demands, check if an alternative arrangement can be made. Adjustments are often possible with enough notice.
Step seven: Explore repayment options
Finally, examine the repayment options offered by student loan lenders. Choose a repayment plan that you can meet—and manage— in case you do not consolidate in the future. Even if you do plan to consolidte your student loans after graduation, it is good to be aware of your current repayment options as well.
