Freshman’s guide to applying for a private loan

If you have already exhausted all your financial aid and federal loan options and you still have a tuition balance due, then you may need to apply for a private loan. Don’t stress out about the process; just follow this quick guide to get things rolling.

• A private loan is a credit based loan. Typically, they come with a 10-15 year repayment term and have a variable interest rate. Unlike federal loans which come with fixed interest rates.

• A private student loan can be used for higher education costs like tuition, room and board, books, transportation and other expenses.

• For the majority of private loans you must be registered at an accredited private or state college and be enrolled as a matriculated student in a degree seeking program.

• Before you apply for a private loan you should already know exactly how much financial aid you are eligible for. Subtracting your financial aid award from the bill should tell you how much to apply for.

• Your goal is to use a minimal amount of private loans to fund your education. The less you take out the less you will have to repay. It’s that simple.

• Estimate what your repayment would be by using loan calculators.

• If you are just finishing high school, chances are you don’t have much credit history and will need a cosigner to get approved for a private loan. If you are an adult who is continuing their education, you might qualify for a private loan without a cosigner, but keep in mind that there may still be benefits in the way of reduced interest rates on some programs if you apply with a cosigner.

• A cosigner is someone who signs on the loan with you. This means that if you do not pay your loan back, then the cosigner is responsible for the repayment of the loan. Virtually anyone can be your cosigner, but most often it’s a parent or close relative.

• Look for a loan that can provide a low interest rate. A lower rate can save you money during repayment. You also want a lender that can provide good repayment options such as rewards for on time repayment, or cosigner release options.

• Remember that you will need to continue this process for each year you are in school. Before each semester begins you should know what financial aid you are receiving and review if any additional funding is required since financial aid awards can change each year.