When you're thinking about applying for a loan, also think about getting a cosigner Cosigner - An additional applicant added to a loan to meet the creditworthiness guidelines, usually a parent but not always. A cosigner will have the same legal responsibility on the loan as the primary borrower., such as a parent or guardian. By having a good, credit-worthy cosigner, you better your chances for being approved and may be able to get a better rate on your loan. As a smart borrower, also be sure you can pay back on time because there are penalties for late payments.
A smart borrower should always know the interest rate they've signed up for, and be aware of the terms of the loan. Be careful not to borrow more than you need or can comfortably repay based on your expected salary after you graduate. Only 8-10% of your pay should have to go toward loan repayments.*.
Make sure that you can afford the monthly payments should your interest rate go up. If you have difficulty making payments on time, your lender may provide you with a temporary delay of your monthly payments.
You may have a number of repayment options with an undergraduate private loan Private Loans - Loans that are not sponsored by the federal government. Private loans, funded by private companies, are not subject to the same restrictions as federal loans.. You can decide not to pay a dime until after graduation (or dropping below half-time), once your education starts to pay off, or begin repaying right away and start building that all-important credit history!
When choosing your repayment option, here are some important things to keep in mind:
Creditworthiness: Creditworthiness is the most important criterion determining whether or not you get a loan. It is a snapshot of how good you have been at paying back loans and how much debt you currently carry. The better your credit rating, the better your chances of getting a loan at a lower interest rate.
Importance of Cosigners: Because students often have no credit history, a cosigner is someone who helps lenders be confident the loan will be repaid and, as a result, may let them offer a lower rate. Parents or guardians with a good credit rating are good cosigners.
Credit History/Ratings: Because creditworthiness is so important, it's good to know and keep abreast of where you stand. Your credit history is the record of your debt payment, including late payments and bankruptcies. It's smart to check on it and you are entitled to one free credit history check per year from all three major reporting agencies. You can obtain your credit report by going to annualcreditreport.com
To learn more, go to the Federal Trade Commission website
As lenders become more selective about who qualifies for a loan and who doesn't, creditworthiness becomes much more important. And the way that is measure is called your credit score Credit Score - Your credit score is a number based on the information in your credit file that shows how likely you are to pay a loan back on time — the higher your score, the less risk you represent.. For example, FICO Credit scores range from 300 to 850. Of course, the higher your credit score, the better your chances of getting the loan you want.
Here are some criteria on which your credit score is based:
* Deanne Loonin of the National Consumer Law Center, Tim Ranzetta of Student Lending Analytics, and Mark Kantrowitz of the Web site finaid.org.
For those who need to take out loans to help pay for college, borrowing can sometimes be overwhelming, and even downright intimidating. It's important to remember that regardless of whom you're borrowing from or how much you need, always keep in mind what is most important to YOU. This may relieve some of the pressure and help you to make the best decision for you and your family.