However, not all education loans are created equal. Some may appear to be affordable, publishing a low teaser rate that no one actually qualifies for. Other loans have hidden fees, or a prolonged, complex application process. By the end of it, you learn that you have qualified for a high rate – much worse than you expected – but you’re so exhausted with the process, you just go ahead and take out the loan.
To help you avoid falling into the trap, we’ve compiled a few tips to help you avoid the most common pitfalls when choosing a private student loan.
TIP No. 1: Look for an easy, streamlined application process.
You don’t have time for a lengthy, time consuming application process, do you? With our student loan partner iHelp, we’ve built an application with you in mind that takes as little as 15 minutes to fill out. For many, this is the first time they’re applying for a student loan. We’ve simplified the process and made it easy. If you still have questions, don’t sweat it, we’re here to help.
TIP No. 2: Insist on transparent terms.
Your private student loan should have understandable terms, written in plain English – no hidden fees, no complicated legalese that no one can understand. With an iHELP loan, the term, rates, structure and repayment options are reviewed with borrowers. There are no surprise fees upon origination, during repayment or in the event of an early pay off. The iHELP program was built on integrity.
TIP No. 3: Pick an interest rate structure that works for you.
We offer variable rates and a fixed hybrid rate. Keep in mind, there are are pros and cons to each:
- Variable interest rate. Your initial interest rate may be lower than a fixed interest rate. However, it can rise or fall with the market and your monthly payment may fluctuate over time.
- Fixed hybrid rate. Your starting interest rate is fixed for 5 years from the first disbursement date and will be adjusted every 5 years. This option gives you more predictable monthly payments, but the initial interest rate is usually higher than a starting variable interest rate.
The decision between a variable or fixed interest rate is a personal choice, and ultimately comes down to your appetite for risk. When you apply, we can show you your payments with each interest rate type to help you choose.
TIP No. 4: Flexible repayment options are a must.
Part of finding a lender with all the perks you’re interested in (hint: it’s us!) includes finding one that offers flexible repayment options. An iHELP student loan offers you a few options:
- No payments: If a student opts to make no payments while in school, they’ll be given a 6 month grace period of no payment requirements upon leaving school or dropping below half-time.
- Interest only: The student defers payments on the principal amount while enrolled in school but pays the interest each month to lower the overall cost of the loan.
- Full payments: The student chooses to make payments toward both principal and interest amounts while enrolled in school to pay the least in interest over the life of the loan.
While we don’t require in school payments, we strongly recommend considering at least interest only payments while in school to reduce the total cost of the loan. Deferment and forbearance options exist for those experiencing temporary financial hardship.
TIP No. 5: Find a creditworthy cosigner.
Since most students are young and don’t have a credit history yet, they’ll need a co-signer on the loan. This person (a parent, relative or other eligible individual) improves a student’s chance of approval and helps them qualify for a better rate. iHELP offers early cosigner release after 24 consecutive timely payments, provided the borrower meets the eligibility requirements on their own at that time.
If you don’t do your homework before taking a private student loan, you could get stuck with an expensive loan with draconian terms. This type of stress is the last thing a student needs during college, or after. No one wants to start their adult life saddled with an unnecessarily large payments, or terms they weren’t aware of. So make sure you deal with an honest student loan provider –it will save you a lot of money and headaches in the future.