Education is a key component for everyone to succeed in life. It provides knowledge and skills that help us navigate the world. Education has many benefits which include but not limited to; Vehicle to a well-paying job, Offer equal opportunities, Make someone self-dependent, turns dreams to a reality, improves self-confidence and self-esteem, boosts the economic growth of a nation and can save someone from being cheated or fooled.
With the prevailing world economic situation and the rising cost of education, financing Education has become a great challenge to most parents and students and the best solution is to seek for an educational loan.
Since education consumes a huge chunk of finances it is advisable to use a loan because it can be spread over a long period of time into affordable installments that will leave you liquid for the purpose of day to day expenses.
Factors to consider when applying for a student loan
Before considering how from whom and which loan to apply for, it is important to consider the following factors;
1. Eligibility – Before applying for a loan, whether Government funded or private loan, it is important to take into consideration the eligibility. For instance, in the case of federal loans, a student must be a citizen of that country, for a private loan, it depends on the lending institution since each institution has its own terms different from the other
2. School fees Budget – School fees depends on the institution and the program to be undertaken. Before applying for a loan it is important to consider the institution rates and the cost of the program to be undertaken. You only need to apply for a loan that is just enough to cater for the education so as to reduce the burden when it comes to paying.
3. Interest rate – Interest rate is the cost of the loan and it depends on the lender. Some lenders offer fixed interest rates while others offer variable interest rates. As compared with a variable interest rate fixed rates loans are usually not expensive.
4. Loan Term – This refers to the duration of the loan. Spreading loan for a longer period is important since it reduces the monthly installment hence maintaining your liquidity position for the purpose of day to day expenses.
5. Non-payment Penalties – These are charges that a loan attracts upon default. When applying for a student loan it is important to consider the consequences of nonpayment. Some loans attract hefty penalties and it is important to avoid them since a student future income is uncertain.
6. Existing Loan Amount – In the case of the multiple borrowers, it is important to consider the number and volume of the existing loans and the ability to meet the monthly installments.
7. Terms and Conditions - Terms and conditions for sanctioning loans vary from one lender to the other. It is important to read all clauses carefully since some may not be expressly communicated to you at the time of application. Ensure you are aware of all associated charges like processing fee, excise duty, prepayment or late payment fee etc.
Types of Educational Loans and their features
1. Federal Students Loan - These are loans provided to students through Government supported programs.
Loans are payable after the studies or after the change of enrollment status
The interest rate is fixed and lower than private student loans
Needy students enjoy subsidized loan where the government pays the interest in the course of the study
Does not require credit checks
Does not require guarantors or a cosigner
Interest is tax deductible
Loans can be temporarily be postponed or reduce the loan installments
No prepayment payment fee
Public Service employees may get loan forgiven
Rates are not negotiable since they are set by the government and change periodically
2. Private Student Loans – A Private student loan is not funded by the government but rather funded by banks, credit unions, state loan programs online lenders or other financiers. A private student loan should be the last resort after exhausting all other options like a federal student loan.
Loan installments are payable immediately after disbursement
They are not subsidized
Have variable interest rates
Requires a clean credit record
Requires a guarantor or a consignor
Interest is not tax deductible
It attracts penalties upon default
The Following are some of the best Lenders where one can access private student loan.
1. Citizens Bank
2. College Ave
3. Discover Student Loans
7. raise private student loans
8. Sallie Mae
For more information on the above lenders, check out Credible today and you will be able to compare different terms for offered by different lenders and be able to make an informed decision on who your financier will be.