The world of funding a college education is complicated and complex at first glance. A little research will go a long way in allowing you to get the best rates on private student loans for your college career.
Start with learning about the recommended lenders provided by the financial aid office of your school.
Do not simply take their list and start applying. You must ask how they determined any ranking, and why they included each company. Remember that one bad apple does not ruin the bunch. Not all financial advisors are being paid off by loan companies, and now more than ever they are under close scrutiny by the federal government. If the school does not seem open to discussing their reasons for choosing particular companies, disregard their ratings.Many financial aid advisors, though, are doing their jobs well. They focus on finding the best private lenders and rate them according to the rates and terms they offer, as well as their customer service capabilities.
Take these lists, and research the companies online. First take a look at their home website. These should offer a general quote for an annual percentage rate. If the home page does not disclose a clear rate, it may not be the best company to choose as full disclosure is important. Then look at a web search for the company. Using reporting agencies, find out if there is a high rate of customer complaints. If there are, you should also try to read through a few of the comments left. The people complaining can sometimes just be angry that they were not able to get an exception to a policy they would have liked, or were sent to a collection agency for non-payment. Decide if the complaints seem like legitimate issues or the person’s inability to accept responsibility for their part in a situation.
Private student loans are generally offers that are made with the borrower’s credit score being a large contributing factor. Arm yourself before negotiating a loan by finding out your personal credit score. If possible, correct any negatives beforehand. Be sure to double check information for accuracy, so that you are not discredited for mistakes by the credit agency, and subsequently offered a higher annual percentage rate.
Also be aware that if you are trying to shop around for the best rate, try to limit the number of applications you place. Narrow down your search to the best two or three options of lenders, because you will usually have to apply for the loan before being given the actual rate offer. More credit inquiries will subtract from your credit score, so do as much research as possible before actually applying.
The ideal FICO score for getting the best private student loan offer is currently 850. This will most likely allow you to secure the lowest annual percentage rate available. Scores that are lower, such as 600 or less, will often be denied for a private loan. The score designates too much risk for the lending company, and they often do not want to incur the expenses later on that it will take to collect the debt from someone who has already shown a tendency to pay late or not at all.
Finally, when you have been offered a rate that you believe is manageable, and you are sent the disbursement check, there will be something called a “Truth-in-Lending” disclosure along with it. Be sure you read this document, and fully understand the details before you actually cash the disbursement check. If there is anything that looks different than the original agreement, or you don’t understand a particular term, FIND THE ANSWER. The legal binding of the loan contract is dependent on this document being agreed upon.