If you’re looking for financial aid, the first place to start is by submitting your Free Application for Federal Student Aid (FAFSA). You might be awarded grants, scholarships, and federal loans. But even with your financial aid award package, you might still not have enough to cover the cost of attendance and all of your educational costs.
That’s where private student loans can help. Private student loans can bridge the gap in funding to make sure you have the funds you need to attend school. In this quick guide, we’ll cover how to apply for student loans from private financial institutions.
How to apply for student loans with a private lender
If you’ve exhausted all of your grant, scholarship, and federal student loan options, it’s time to apply for private student loans. Here are the steps for filling out private student loan applications.
Step 1: Choose a lender
The first thing you want to do is choose a lender. Here’s where to apply for student loans with a private lender:
- Credit union
- Online lender
You can see if your current bank or financial institution offers private student loans. A local credit union might offer better rates, however.
Additionally, there are various online lenders to choose from. For example, as you can see in the table below, you can find online lenders like Credible and LendKey, all of which offer private student loans.
in 2 minutes
One thing to look at is origination fees. Origination fees are charged by the lender for processing a new application. These can add to the cost of the loan, so be aware if there are origination fees and how much they are.
Additionally, here are some important things to look out for when evaluating private student loan lenders, such as:
- The Annual Percentage Rate (APR) — This affects how much you’ll pay in interest.
- Is the APR fixed or variable? — This will determine if your interest rate stays the same or changes based on the market.
- Origination fees — Are there origination fees for taking out a private loan? Any other loan fees?
- Repayment term — This is how long you have to pay back your private student loans. Your loan terms will affect your monthly payment.
- Minimum and maximum loan amounts — Review the minimum amount you can borrow up to the maximum amount you can borrow, so you can ensure you can borrow what you need.
- Eligibility requirements — What is required to be eligible for private student loans with the specific financial institution you’re considering? Do you need a good credit history? What do you need for the loan application process?
- Any discounts — Some financial institutions offer a 0.25% autopay discount, a loyalty discount for being a current customer (such as with Wells Fargo), etc.
- Deferment and forbearance options — If you need to put a hold on your student loan payments, what deferment and forbearance options are available, if any?
Knowing all of these factors can help you compare lenders, so you can choose the best private student loans for you.
Step 2: Gather your paperwork and assess your eligibility
Once you have a lender, gather your paperwork before you start to apply for student loans online. Get your tax returns, pay stubs, personal info, etc., so you can fill out the application in one sitting. Review the eligibility requirements for the lender to see if you qualify.
To help you apply for student loans online and make the process easier:
- Check your credit score
- Review your credit report at AnnualCreditReport.com (if there are errors, dispute them)
- Gather your most recent tax return
- Gather your most recent pay stub
- Have your employment history with name, address, phone number available
The documentation you need can vary by lender, but having this information ready will be useful and help you prepare for the application process.
Step 3: Fill out the application
You can apply for private student loan options online with the lender of your choice. Fill in your personal information, attach any required documentation, and submit the completed application.
Step 4: Add a cosigner
You’ll likely need a creditworthy cosigner when applying for private student loans, so you’ll want to add them as part of your application to be considered.
Step 5: Review terms
If you get approved for private student loans, you’ll want to review the terms and conditions of the loan, such as the repayment options and any disclosure information you should be aware of. Review everything carefully. Once you feel confident you’re not missing any “gotchas” that could come back to bite you, sign and accept the loan.
Step 6: Accept the loan
When you’re done with your student loan application, sign the paperwork to accept the loan and use your private student loans toward your education.
Caveats about private student loans
Private student loans play a role in the financial aid ecosystem by covering any remaining educational costs after grants, scholarships, and federal student loans. But there are several important ways that private student loans differ from other types of financial aid.
For example, federal student loans like the Federal Direct Loan are backed by the U.S. government and offer various repayment programs — including student loan forgiveness. Private student loans, however, come from financial institutions and don’t offer the same benefits.
You won’t be able to get student loan forgiveness with private student loans or request an income-driven repayment plan to lower your monthly payments. Private student loans can be tougher to get, because unlike most federal student loans, they’re credit-based. Your credit can affect:
- Whether you’re approved for private student loans
- Your private student loan interest rates
- How much you will pay in interest over time
- Whether you need a cosigner
In fact, the majority of private student loan borrowers require a cosigner. The Consumer Financial Protection Bureau found that 90 percent of private student loans had a cosigner.
A cosigner is a co-applicant who is equally responsible for the loan if you fail to make payments. Typically, a cosigner is a family member or spouse, but it’s a big responsibility. The cosigner would also need good credit — this requirement can vary by lender, but a good benchmark is a credit score of 700 or above.
Knowing these facts about private student loans can help you make an informed decision about how much to borrow. Only take out what you need and work on improving your credit by making on-time payments and keeping your credit balances low.
If you’re concerned about how to apply for private student loans and how much you’re going to borrow, get in touch with us for a predebt consult. We can make the process easier to understand and make sure you borrow just what you need.
in 2 minutes
1Sallie Mae disclosures. Lowest APRs shown for Sallie Mae Loans: The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.
2Earnest: All rates listed above represent APR range. Rate range above includes optional 0.25% Auto Pay discount. Earnest disclosures.
3Ascent disclosures. Disclosure: Ascent Student Loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 12/01/2022 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs require interest-only payments, the shortest loan term, and a cosigner, and are only available to our most creditworthy applicants and cosigners with the highest average credit scores.