Image by from
For many students across the country, taking out a is the only way they can afford to get the education they want and need.
While other options, like scholarships or financial aid, are available for students meeting the criteria for others whose parents can help them or can’t cover the entire four-year tuition, student loans can bridge the gap and are a necessary evil.
However, not all student loans are the same. Understanding the financial agreement you’re signing up for and knowing how to find the best student loans can empower you, giving you the control to avoid some of the common pitfalls of student loans and make more informed decisions. So here goes.
Review Details
Did you know there are and education? Some lenders might fund loans for trade school, while others have special rates and terms for medical, dental, or law school, for example.
Check the loan details and ensure it’s the best deal for your type of education. Also, make sure you understand the repayment terms, the interest that will be added, and the interest rates. Ideally, the loan you take out needs to cover the amount you need and be flexible to accommodate your changing circumstances.
The will be upfront with the details of their plans to allow you to make the right decisions.
Compare Interest Rates
Different lenders will have different interest rates, and different terms and loan amounts will also vary when it comes to interest. Typically, you can get student loans fixed or variable in terms of interest rates – fixed interest rates may initially be higher, but they will remain the same for the duration of the loan and are more predictable, while variables will initially be lower and can change with the market meaning the payments can fluctuate up or down.
It’s also worth looking for interest capitalization, which occurs when the lender and unpaid interest on loans increase the loan amount.
Top tip: Use to check the loan amount and interest rates you’re being offered with different lenders. This way, you can be proactive and shop around without impacting your credit score. Then, when you find the best deal, you can apply, feeling in control of your financial decisions.
Check Fees
Always look for the fee schedule for the loan you’re considering taking out. You can ask your lender for a breakdown of fees and what you’re expected to pay; some lenders charge no fees but have higher rates, while others charge a fee, and you qualify for lower rates.
The types of fees you can expect on your student loan include application fees, origination fees, and late fees.
Application fees are as they sound and nonrefundable for processing the application. Origination fees are fees charged by the lender for processing your loan amount and come from the loan amount you qualify for. So if your loan is $10,000 and the origination fee is 5%, you only receive $9,500 as the other $500 goes towards the fee. And late fees again, as they sound, are fees added to your account if you miss a payment or are late. You usually pay a percentage of what you were due to pay, but they are capped.
However, lenders are not able to charge prepayment fees if you settle your loan early, so you don’t need to check for this.