Some Facts You Need To Consider When Comparing Private Student Loans Products
First, you must focus on the APR. A private student loans pricing will consist of two components; the interest rate as well as other fees, which can be charged at the time the student loan is disbursed or when the student loan enters repayment. The annual percentage rate (or APR) is a value, which reflects the true cost of the student loan and captures both of these components. Lenders and financial institutions are required to provide all APR information to any prospective borrowers. In addition, private student loan borrower should also be aware that the formula that is used to calculate APR will often change depending on whether the borrower is in school or in repayment. You should compare the cost of private student loan products by comparing both the in school and in repayment APRs.
Second, it is very important to have an idea of what rate you should be able to qualify for before you apply. Many private student loan providers will market their products advertising rates as low as a specific interest rate. Unless you are a loan seeker with an almost perfect credit score, chances are you will not qualify for that lender’s lowest rate. Your APR will be determined by your credit history, your debt-to-income ratio and, with many lenders and financial institutions, by the school you have chosen to attend. Borrowers that are attending schools with a low student loan default rate are viewed more favorably.
A smart borrower will first obtain their credit score and history first from one of the three major credit bureaus (Experian, TransUnion, or Equifax - one should be able to obtain there credit score for $15.00 or less) before they start to shop for private student loan lender. With your current credit score and history, you will be able to get a good idea of what your APR will be before you even apply. Though most lenders and financial institutions will probably not be able to tell you your actual APR until you apply (they do have to do their own credit check), they should be able to let you know what their available pricing tiers, which are the different APRs available to borrowers with excellent, good, or fair credit. The pricing tiers will also vary depending on whether or not you are going to apply with a co-borrower and the co-borrower’s credit. Applying with a co-borrower can often provide access to a lower pricing tier.
As new private student loan applications can have a negative effect on your credit score because lenders will view the fact that you are looking for more credit as a risk, it is very advisable that you do not apply for any private student loan product until you have some idea of the interest rate you will qualify for. If your prospective private student loan lender will not provide you any idea of their pricing tiers prior to applying, it is strongly advised that you should not do business with that lender or financial institution.