Federal Student Loans Vs Private Loans For Students

Loans that are unsubsidized or Government student loans are sometimes preferred because they do not require credit checks and because there is deferred interest for any student maintaining an acceptable great point average. These are sometimes desirable but difficult to obtain. They normally have very strict requirement, whether these requirements are based on grade point average or a family's financial situation. Also, these types of loans rarely cover 100% of college tuition. For families that do not qualify or need 100% financing there is another option - private loans.

However, private loans are not a solution without some negatives. They always involve a credit check and if you have less than perfect credit it may be difficult to qualify. If your credit is good enough to qualify but has a few blemishes on your credit you may be offered a loan at a much higher interest rate.

In addition to interest rates there are loan fees that must be considered. A private loan will often carry with it a 1% (or higher) loan fee along with other applicable fees. These fees are added to your loan amount and are factored into your repayment amount even though you never see that money. So interest rates are not the only things that can make a loan costly.

The Up Side of Private Loans

Unlike government lenders private lenders are in the business of loaning money. If they do not make the loan they do not get their income of interest and fees. Therefore, they make every effort to get you approved and loan you the money you need and are often willing to work with you through any difficulties you may be having getting qualified. This makes their money more readily available and easier to obtain. Government lenders are not that accommodating.

Private loans also often come with better customer service. They hope you will return if you ever need a loan in the future. Government lenders are not concerned about clientele. So while they do have customer service available you may not receive as rapid or as friendly service as you will with private lenders.

There are other aspects of personal loans that do make them a more appealing choice for many.

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