Types of Private Student Loans

Private student loans are school loans that are offered by private lenders instead of the federal government. However, if you are looking for a loan, you may find that there are several types of student loans available from these private lenders, including degree-specific loans, bad credit loans, and international student loans.

Here’s what you should know about the types of personal student loans and which one is best for you.

What is a private student loan?

A private student loan is a student loan offered by a private lender such as a bank, credit union, government agency, university, or other lending institution.

Private student loans are generally best considered when you have run out of federal student loan quota or when you can qualify for better terms than the Department of Education through a private lender. But even then, many experts recommend using federal loans first.

Unlike federal loans, student private loans require a credit check when you apply. They also offer a range of interest rates, often both floating and fixed, and which one you qualify for depends on your creditworthiness.

Private student loans typically do not provide access to income-based repayment plans or student loan waivers. However, as the Department of Education does, private lenders typically do not charge upfront loan fees. Also, you can often borrow as much as you need, so they can be a good option when you run out of federal student loans.

Types of personal student loans

There are a handful of different types of personal student loans that you can choose from. Understanding student loans can help you get a better idea of ​​which option is best for you.

Course-specific loans

In principle, private lenders can offer loans to undergraduate and graduate students. However, some may go above and beyond with a list of other degree-specific loans for medical, business, dental, and law degrees.

You may even be able to get a loan to study for the bar exam or for your time at a community college.

International student loans

International students may have difficulty obtaining loans when they need them. If you are a permanent resident or have a specific visa, this may be all you need to get a student loan. If not, some lenders specialize in offering student loans to international students who may not meet the standard requirements for traditional personal loans.

Bad credit loans

If you are in need of student loans and your creditworthiness is poor or nonexistent, federal student loans are your best bet as they usually don’t require a credit check.

However, if you are in need of personal loans, there are lenders who have less stringent loan requirements for college students who haven’t had a chance to build credit, or students or parents who need funding but don’t have outstanding credit history. Note, however, that these loans typically charge higher interest rates than regular personal loans.

Country-specific loan programs

Many states offer private student loans through a specific government agency. Some examples are the Rhode Island Student Loan Authority, Iowa Student Loan Education Lending, and the Bank of North Dakota.

These private student loans are usually reserved for students attending college within a country’s borders, but may also be reserved for residents studying in another state. Eligible requirements vary from state to state.

Income-sharing agreements

Income-sharing arrangements work differently than traditional student loans. Instead of making a fixed monthly payment based on your student loan balance and an interest rate, you pay a percentage of your income over a set number of years.

Before applying for an Income-Sharing Agreement, you should find out about the income percentage and the repayment deadline. These agreements usually also have a lower salary limit and a maximum payment limit to ensure that both parties are treated fairly.

Which private student loan is the best for me?

When considering a private student loan, take the time to review your needs to determine which one is best for you. Compare all credit characteristics, including repayment terms, costs, and interest rates, to save as much money as possible.

Comparing income-sharing arrangements to more traditional personal loans, you can also use an online calculator to get an idea of ​​what you will end up paying and how that compares to the interest rates on another type of loan.

How do I apply for a private student loan?

Apply for the federal student loan by completing the free application for federal student aid (FAFSA). However, with private lenders, contact the lender of your choice directly to find out what terms you qualify for.

Most private lenders can even prequalify you with a gentle credit check. This process doesn’t affect your credit score, but it can give you an initial quote based on the information the lender can see. Comparing the personal loan interest rates from multiple lenders can make it easier for you to choose the most suitable loan for you.

Once you have submitted your application, the lender will issue you with either an approval or a denial. If you are approved, the lender will provide you with the terms of the loan. If you accept the offer, you sign the paperwork and the lender will pay out the loan to your school.

If you have been rejected, you may be able to re-apply to a creditworthy co-signer who can improve your chances of getting approval. Even if you can qualify yourself, a co-signer can help you get a lower interest rate.

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