With the growing preference for studying abroad, student loans have become an increasingly popular choice for students to finance their studies. With flexible requirements, assistance from the provider, and negotiable interest rates, private student loans are an excellent option for students pursuing higher education.
So, what are these private student loans, and how do you get one? Here's our ultimate guide that can take you through your journey! Read along.
What are Private Student Loans?
Private banks and other financial institutions provide personal student loans. The loan is primarily offered only for academic purposes and covers the attendance costs of any school, college or university.
Private student loans are of two types;
- Secured Student Loans
- Unsecured Student Loans.
Secured loans involve collateral security that the borrower must submit to obtain a student loan. Secured-private loans are a great option if you still need credit scores. On the other hand, unsecured student loans don't involve collaterals. The loan amount limit is decided based on your credit score. If you don't have credits, a parent or a legal guardian can be your cosigner for the loan, and the limit will be decided based on their creditworthiness.
Interest rates of private student loans are also decided based on the borrower's or the cosigner's credit scores. So, the higher your credit score, the lower your interest rates.
Private student loans Vs Federal student loans
Unlike federal loans that the government offers, private student loans are loans that private banks, unions, and finance companies provide. Even though federal student loans come with many benefits, including different repayment methods and low-interest rates, they are difficult to obtain because of strict eligibility requirements. On the other hand, a private student loan, with its flexible criteria, is easier to get compared to federal student loans. Private student loans may also require you to have a specific credit score. However, in case you don't have a good enough credit score, collateral or a cosigner might do the trick.
Why opt for a private student loan?
Federal student loans generally come with a limit and a lot of time; the required amount for the applicant may exceed this limit. Even after applying for grants and scholarships, the cost of attendance may still be significantly more than the loan limit. In such situations, the applicant might apply for a private student loan to cover the rest of the expenses. Unlike federal loans, private student loans don't have a fixed limit. The limit of the loan is decided primarily by the applicant's credit score or the value of the collateral.
Private student loans are also more accessible for international students, especially since government-backed federal banks are more strict with their eligibility requirements and guidelines.
How to apply for private student loans?
Applying for a private student loan may be easier than a federal one, but the process can still be complex for anyone doing it for the first time. Thus, to make it easier for you, here's our four-step roadmap to applying for a private student loan:
Step 01: Do your research
Before applying for a private student loan, it is essential to find the best options for you to choose from. Researching at least 2-3 options is always advisable, and comparing the interest rates is always advisable. Make sure you research for information about your provider's repayment modes. Find out what kind of loan makes more sense to you, i.e., if an unsecured or secured student loan is more feasible for you.
Step 02: Check for eligibility
Now that you have some options, you have to make sure you are eligible to apply for the loan. The requirements and eligibility criteria change from provider to provider. Thus, you need to ensure you are fulfilling the requirements for the loan to work out in your favour. You can contact the bank or find the requirements on their website. Find out if you need a cosigner for the loan application process.
Step 03: Prepare your documents
If you check all the boxes, it's time to prepare your documents for further processing. The essential documents that you need to submit can include the following:
- Proof of admission (university acceptance letter)
- Academic paperwork
- Copy of Visa (if you are an international student)
- Previous bank statements
- Student accommodation proof
- Permanent residence proof
- Any ID proof
Step 04: Apply for the loan
After gathering your documents for the private student loan, you are now ready for the application process. Fill in the application form your loan provider offers and fill it out duly. Submit the application form along with the required documents for thecess to begin. After verifying your documents and eligibility, the bank will know if your application has been accepted; you can then obtain the approved amount from your bank.
Best private student loans
Given the high-interest rates and risks related to private student loans, you must find a loan provider that is the right fit for you. To help you with your hunt, we've curated a list of the best student loan providers that you can use to get your perfect financial match. Here are the five best providers you can opt for;
Gyaan Dhan is one of the best loan options available for Indian students regarding private student loans. It is the largest marketplace for student loans with reliable, high-street banks and providers like SBI, ICICI Bank, HDFC, and Axis Bank. Gyaan Dhan offers private student loans at the lowest interest rates, making loans more accessible and affordable. With expert assistance, the private student loans on this platform are hassle-free.
To find the best provider for you, Foreign Admits can be the greatest tool you may come across today. This AI-powered provider marketplace can analyze your preferences, compare them to reliable providers, and suggest your perfect fit. Foreign Admits hosts around 17+ banking partners and thus offers you a long list of providers.
If you are looking for a reliable student loan provider, MPower Financing is one of the best. The loans offered come with a fixed interest rate that doesn't increase under any condition. The loans are quick and easy to apply for with more flexible guidelines, which is especially beneficial for international students. MPower Financing offers funding for one- and two-year postgraduate and graduate courses. With 100% academic coverage and no additional fees, this provider makes it to our list of the best private student loan providers.
With the great variety of student loans that Sallie Mae provides, this particular provider is a one-stop solution for academic funding. Sallie Mae covers everything from business studies to medical, graduate, postgraduate and training courses. The loans also offer many benefits, like multiple payment options, including deferred, interest and fixed repayment, with no prepayment penalties and additional charges.
Obtaining unsecured student loans without any collateral is quick and hassle-free with Auxilo! If you are looking for student loans for any course and educational background, Auxilo has something for everyone. Intending to make education more accessible to everyone, the provider also offers education ecosystem financing services and loans for higher education.
With strict limits and requirements, federal student loans may not be enough or accessible for everyone. In this case, private student loans can come to the rescue can be provided by reliable student services. With the right research and resources, private loans can help you achieve your dreams of studying abroad. Read more about student loan forgiveness and how to spot scams related to it. You can also read my blog on how student loans affect credit scores and how you can pay student loans early.
We hope this guide helps you out in your search. Happy Hunting!