How To: Things To Keep In Mind When Taking A Student Loan
Getting that college acceptance letter in your hand can make you jump out in joy. But wait, you are only half-way through the battle. The other half of the battle requires you to find a way to fund your college expenses. There’s no denying that the easiest solution to the problem is taking up a student loan for the purpose. However, before you go off on your way to sign on the dotted papers of a student loan, you need to be aware of certain aspects regarding the same. Here are a few things that you need to keep in mind when taking out a student loan:
Federal student aid is not the only option
When it comes to paying for college, many students tend to believe that federal student aid is the only financial help they can have. Not considering the private student loans can be a big mistake. Ignoring the option of a private student loan can limit the choices of a student as far as financing the college expenses is concerned. Also, federal student aids have a limitation. If you are interested to attend an expensive college, the federal aid may not be enough to cover all the expenses. This means you may be left searching for other means to cover the gap between the aid you received and the money you require. With a private student loan, you can overcome this gap in a stress-free manner.
The shorter the loan term, the lesser you pay
Regardless of the amount you take up as a loan for financing your college education, you will have to pay interest on it till you repay the debt completely. Remember that the time taken to pay off the loan can make a big difference to the overall cost of the loan. If you take a long time to repay the loan, you will be spending more money to pay the interest over the entire duration of the repayment period. On the other hand, if you plan to pay off the loan quickly, you may have to pay a large monthly installment. But overall, you will be saving a lot in terms of total cost of the loan. So, decide on the loan term very carefully when taking out the loan.
Be sure of the grace period
Grace period refers to the time you have on your hands after graduating from college and before you repay the first installment for your student loan. But every student loan doesn’t come with the same grace period. Usually, student loans come with a grace period of about 6 months. However, some loans may not offer you any grace period at all. That is why you need to be sure of the grace period of your loan. Having a grace period on your hands is essential. It enables you to find a job and earn a few paychecks before you can start repaying the loan. But if you wish, you can start repaying the loan even before the grace period is over. This will help to bring down at least some amount of the interest getting accumulated on the loan.
Consider the co-signer option carefully
Having a cosigner for your student loan can be a definite advantage for you. Most lenders prefer to have a cosigner for a private student loan. Some even make it a mandatory requirement of approving the loan. The main advantage of a co-signer is that you can expect to get the best interest rate for your loan. Based on the good credit history of the co-signer, your lender may be willing to bring down the interest rate. But remember that not every loan has the cosigner release option. If your co-signer wants to be released from the debt agreement after you start repaying the loan, you need to ensure that your loan has the provision for that. Also, note that you will have to make a certain number of loan payments on time to be able to release the co-signer.
Avoid last-minute loan application
There may be a number of reasons due to which the processing of your loan application can get delayed. As a result, the loan disbursement can also take time. To make sure that your loan application gets cleared on time, apply well before the due date of payment in your college. This will save you from the hassles and stress of eleventh-hour borrowing or paying late fees at the college.