The Best Private Student Loans of 2020

18 Sep 2020

Education expenses have increased manifolds, but to suffice this, there is a provision for applying for a student loan. These loans come at a certain interest rate, and one can easily get it without any hassle. However, the loan offered by the government comes with a limit. For example, a student willing to enroll for the undergraduate program can get a loan of $5,500. However, those who wish to enroll for the postgraduate program can get a maximum loan of $20,500.  In this, one needs to know that the maximum limit may vary.

If you wish to get a higher loan, then there are private lenders who offer loan at the different interest rate. Before applying for the same, you need to compare the interest rate offered by shortlisted lenders. In addition, you also need to check other factors such as –

  • Fees
  • Penalty
  • Perks
  • Repayment Period
  • Coverage

How Private Student Loans Work?

We already know about the Federal student loan. It offers a standardized type of loan which comes with a definite loan amount and terms. However, with the private student loan, the interest rate may vary, and there are certain laws which affect the loan. One such factor is the credit. Your credit history and that of the co-signer will impact the loan amount and approval.

Loan Types

There are different types of loan offered by lenders. The loan amount may for each of the types, so you need to consider what exactly you are looking at before finalizing the loan:

•    Community College or Technical Training- If you plan to learn a two-year degree course and are attending non-conventional school, then you can opt for this type of loan.

•    Undergraduate School Loans- If you plan to pursue the undergraduate course, then you can apply for this type of loan. It may come at a lower interest rate and you can also get a higher loan limit.  

•    Graduate or Professional School Loans- As evident from the name, this loan is available to those who wish to pursue graduation or any professional degree. Some private student loan lenders also offer special loans for medical programs, law, and business management.

•    Parent Loans- In this type of loan, parents take a loan on behalf of the student, and the repayment responsibility falls on parents.  

Term of the Loan

This is basically the repayment period. If you take a private student loan, then the tenure ranges between 5-20 years. If you take a shorter-term loan, then the interest rate is lower, but monthly pay becomes higher. Similarly, if you avail longer tenure loan, then the interest rate might be on the higher side, but the monthly payments would be shorter.

Loan Limit

This is basically the loan amount that the lender approves. There is a minimum amount which can be as low as $1000.

The maximum loan limit is the maximum amount that you can borrow from the lender. This loan amount may be higher if you are applying for a professional course or medical college. You can shortlist the bank and based on it; you can decide what loan amount you are looking at, don’t forget to gauge into the interest rate offered by them.

Interest Rate Types

Any kind of loan comes at an interest rate. Now this rate may vary from bank to bank, so while shortlisting you need to check with the bank what the interest rate they are offering is. In fact, the interest rate is the deciding factor for loan application. You might not be able to change the lender after getting the loan approved, so it’s always advisable that you must check with the bank what is the interest rate that they are offering, thus ensuring that you get the right lender.

The interest rate or the APR is your total cost of borrowing every year. It takes into account various aspects like how often the interest is compounded, fees, and discounts (if any).

What are the different types of Interest Rates?

1.    Fixed interest rate- As evident from the name, if you go for this type of interest, then it is fixed, and it is not going to change till the time you repay the entire loan. It is a good option if you are looking for a long-term financing option.

2.    Variable interest rate- The factors which influence the variable interest rates are the same as that of the fixed interest rate. But the variable interest rate is bound to get deflected, and the amount may rise or fall.

Tabular Representation of some of the best private student loan lender for the year 2020

 

Sallie Mae

CommonBond

College Ave

Citizens Bank

Wells Fargo

Variable APR

4.25% - 11.35%

2.49% - 7.11% 

3.99% - 11.98%

3.99% - 11.64%

5.04% - 10.93%

Fixed APR

5.49% - 11.85%

3.69% - 8.07%

4.73% - 12.94%

4.90% - 12.04%

5.94% -  11.26%

Origination fee

No

Yes

No

No

No

Repayment terms

5 - 15 years

5, 10 or 15 years

5, 8, 10 or 15 years

5, 10 or 15 years

15 years

Co-signer release

After successful paying for 12 months you can get the co-signer release.

After successful paying for 24 months you can get the co-signer release.

After half your term has elapsed and After successful paying for 24 months you can get the co-signer release.

After successful paying for 36 months you can get the co-signer release.

After successful paying for 24 months you can get the co-signer release.

Benefit

Study support, credit score tracking

You can pause repayment for 12 years after leaving the school.

Get a bonus of $150 on graduating

Get an approval for multiple years of loan in one go

N/A

How to apply for a Private Student Loan

To get an approval on the private student loan, you must qualify for the loan and to make that happen, you need to check the eligibility criteria for the same.

1. Eligibility: The basic eligibility includes citizenship status, enrollment letter, the co-signer needs to produce income history, credit history, and must be eligible.

2. Documentation: 

  • Address proof
  • ID proof
  • Recent proof of income
  • Bank account balances
  • Name of the school and course for which you are enrolling
  • Anticipated date of graduation
  • Co-signer name and valid contact information
  • Passport size photographs

Processing: After you have collected all the information, you can apply for the loan either online or offline. After filling the form and submitting the necessary documentation, the lender will process the form and approve the loan.  

The Bottom Line- Private Student Loan is a great way to fulfill your desire to enroll for a program that you want to study, but make sure that you compare the interest rate and other factors before applying for a loan.