Private student loan mistakes borrowers should avoid
While the summer months are most popularly known for vacations and barbecues, for a certain segment of the population, July and August are also the time to get their finances in order. Specifically, they're when college students preparing for the fall semester generally apply for financing for the upcoming year. Whether they're going into their final year of undergraduate schooling or just starting out with their college education, they'll likely need some form of financial support for their education.
They can do this in two primary ways: through federal student loans, which are provided and serviced by the government, and private student loans, which are funded by private companies. Most borrowers lean on the latter when the former isn't enough to fully finance their education.
Private student loans have multiple benefits for borrowers. To get the maximum benefit, however, borrowers should do their research and be careful to avoid some common mistakes. Start by exploring your private student loan options here to see how much you're eligible to receive.
Private student loan mistakes borrowers should avoid
Here are three common mistakes private student loan applicants should avoid making.
Not shopping around
When it comes to financial products and services, it pays to shop around before signing on the dotted line. This is true for everything from pet insurance to life insurance to mortgages. Private student loans are no different. You won't truly know if you're getting the best rates and terms until you've done your research and compared multiple private student loan lenders.
But compare more than the interest rate. Look at the terms each lender has and their repayment schedule and flexibility. A slightly higher interest rate may be better for you if the other options are favorable for your situation.
When comparing private student loan lenders, make sure to complete an accurate, side-by-side analysis. Get rates for the same amount for the same time frame from at least three lenders. This will ensure you have an apples-to-apples comparison and that the lender you ultimately choose truly is the best for your circumstances.
Shop student loan lenders here now.
Applying with a poor credit score
The best private student loan rates and terms are reserved for those applicants with the highest credit scores and cleanest credit histories. So make sure you've built your score as high as possible before applying. Otherwise, you risk being rejected for a loan (or receiving one with a less-favorable rate).
For applicants with an incomplete credit history, consider adding a co-signer. A co-signer with a favorable credit profile can go a long way toward boosting your application. And it doesn't need to be permanent. Once you've built a credible credit score and history, you can remove the co-signer from the loan and pay it off by yourself.
Either way - with a co-signer or without - don't simply apply without knowing and boosting your score as much as you can in advance.
Applying for more than you need
It may be tempting to shore up your private student loan support as much as possible by over-applying for assistance. But applicants should avoid the temptation. The more you get approved for, the more you'll have to pay back - and the less disposable income you'll have once your college years conclude.
Instead, consider applying for the minimum you'll need to get by once federal loans and other savings and support have been exhausted. Remember, interest and fees can add up quickly. Do your best to minimize how much they'll cost you by only applying for what you need - and nothing more.
Explore your private student loan borrowing options here now to learn more.
The bottom line
Private student loans can be a reliable and cost-effective way to finance your college education. But, like all other loans, there are mistakes borrowers should do their best to avoid to get the most out of their funding.
Specifically, they'll want to shop around and compare multiple lenders (at least three) before taking out a loan. This will ensure they receive the best and lowest-rate loan possible. They'll also want to make every effort to improve their credit score before applying or add a co-signer to secure better terms. Finally, applicants should avoid applying for more funding than they'll need in order to avoid getting stuck with big loans and high interest rates long past their graduation date.
