5 Things to Know Before You Apply for a Student Loan
Once you have landed the most cherished offer for pursuing your higher studies from a prestigious university, the next step is to gather the financial resources to pay for your admission. With a major chunk of the courses requiring hefty tuition fees, most students across the country end up taking out student loans for the purpose. However, before you zero in on the most cost effective deal from a reliable lender and sign on the dotted line, there are a few things that you must consider while applying for a student loan.
A Student Loan is Either Private or Federal
Despite the fact that all the various loan programs come with a different set of terms and conditions, a student loan can be broadly classified into one of the two kinds namely, federal or private. While federal loans are directly funded by the government, the private student loans can be availed from one of the individual creditors such as credit unions or banks. Although, there are several private lenders who will offer impressively low interest rates, it is advisable to maximize your federal loan options first.
Loan Tenure is an Important Aspect of Repayment
While it is natural to feel driven towards an option (longer tenure) that allows you to pay smaller monthly installments over a longer period of time, it might actually cost you a lot in terms of higher interest liability in the long run. However, paying off your student loan debt within a short span with larger monthly payments will ensure that your principal amount keeps getting lowered and you pay less interest over the years.
Analyze Your Repayment Options
The repayment options that you can secure will largely depend on the type of loan that you have availed. For instance, federal student loans will offer you an array of borrower benefits such as flexible repayment plans which comprise of several facilities including debt consolidation, payment extension and syncing your monthly installments with your income. As far as private student loans are concerned, you can check with your respective lenders to know more about the various repayment options that they offer.
You Can Get Relief on Your Private Student Loan
Apart from the benefits that federally guaranteed student loans offer to their borrowers, there are several private lenders as well, that will help you meet your monthly repayments during a financial crunch by offering you certain flexible alternatives. For example, there are several banks such as Discover and Wells Fargo that offer the facilities of interest rate reduction or loan modification to borrowers who are suffering a financial setback of some kind.
Know About Your Grace Period
Most loans come with a grace period that offers you a certain window before you are obligated to make your first installment payment. The idea is to give some time to the borrower to get a job and make some income before he has to start dealing with his debt liability. However, since all loans do not offer grace periods, you must inquire about your first due date from your lender to avoid missing out on your payments.