Help! I need a private loan before school starts
For some students, the semester begins in less than a month and there is a rush to secure financing. Does it seem harder to get the money you need this year? You might be right. The bad economy and the tight credit markets haven’t been good for student loans.
When shopping for your private loan this year, you’ll probably notice that there are less lenders advertising on the internet. That’s because there are only a handful of lenders making private loans for the upcoming school year. If you have a co-signer with an excellent credit score, you shouldn’t have any trouble securing your private loan. But the average borrower is going to have to work a little harder to get approved this year. That also means you may have to do more research, because private loan products and interest rates may have changed since last year.
If you need a private loan before school starts, here is what you need to do:
- Double check that you have maxed out on federal student loans
Make sure you have taken out the maximum amount available to you in federal student loans. Work with your school’s financial aid office if you were not given the maximum amount listed below for your grade level:
- $5,500 Freshman
- $6,500 Sophomore
- $7,500 Junior, Senior and 5th year undergraduate students
Make sure you get enough information on federal student loans and financial aid planning. If you haven’t tried scholarships, grants and federal aid yet, you’re not ready for a private loan.
- Identify potential private loan co-signers
Most undergraduate students are going to need to find a co-signer to get a private loan this year. And when we say “most,” that’s an estimated 9 out of every 10 students. Identify anyone over 18 who has significant income and a good credit history, like a parent, relative or friend. Remember that this person will be responsible for the loan with you. Read more about what makes a good co-signer.
- Research private loan options
The best place to begin researching private loans is probably your school’s financial aid office. Your school has likely already done some of the research for you and has selected lenders who might fit their student’s needs.
When you are reviewing private loan products, make sure the lender you choose has things that are important to you and your co-signer such as:
- No payments until graduation vs. payments required while you are in-school
- Various repayment options once you begin repaying the loan
- Co-signer release option (your co-signer can eventually drop off the loan once you qualify)
- Lender incentives (special rebates or interest rate reductions for making payments on-time or paying automatically from your checking account every month)
- Deferment and forbearance options
- Apply for a private loan
When you have selected a lender, and are ready to apply, remember that you and your co-signer will need to have these things handy:
- Driver’s license number
- Social security number
- Current and previous addresses
- Verification of income documentation
- The loan amount you are requesting
If your private loan is denied, you may need to try to find another credit-worthy co-signer. Credit standards and acceptance rules are unique to each lender, so you and your co-signer can also try to apply with another lender.
If you have further questions on the private loan process, check out our private loan FAQ.