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How To Apply For A Student Loan

Step 3. Compare The Other Loans Available To You

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As a general matter, it is always wise to compare alternatives. With respect to student loans, keep in mind that multiple requests for credit in a short period of time may affect your credit rating (and/or the rating of your loan guarantor if you have one).  This isn't the case for multiple requests in a short period of time when looking for a mortgage and similar loans, but it is the case with student loans. According to Ron Lieber, author of "Your Money" column in the New York Times: "Some shopping around still makes sense. You'll probably do best by comparing three or four lenders and finding the lowest rate -- even if your credit takes a small hit in the process."

It's difficult to learn the reality of private loans until you actually apply for one. The advertised rate and terms are not necessarily what will be offered to you. The only way to know is to apply. One easy method is through web sites such as: www.StudentLoanMonkey.com offsite link or www.FinAid.org offsite link. These sites generate loan offers from multiple lenders (not ALL possible lenders). There is no charge to the student or the school. According to SmartMoney Magazine, StudentLoanMonkey submits a "soft" credit inquiry which does not affect your credit rating.

When comparing loans, among other factors, look at:

  • Origination fees.
  • Interest rate.
  • Whether the interest rate is fixed (so that it remains the same over the term of the loan) or variable (changes over time with a change in a particular index.) If it is variable, is it tied to a bank's prime rate or possibly the London Interbank Offered Rate (LIBOR).
  • Amount of your payments.
  • Term of the loan.
  • When you have to start making payments.
  • Factors which can reduce payments, such as on time payment, or automatic payment from a bank account.
  • Situations in which payments are deferred, for which there is forbearance, or when the loan can be cancelled. Relate each of those rights to your particular health situation. It is advisable to make an alert on your computer or an entry in your calendar for every six months to remind you about these rights in case your health situation changes.

You can genearlly minimize costs by asking a person with good credit to be a co-signer on the loan.


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