How do you plan on funding your college education? Aside from receiving financial support from your parents, applying for a grant, or working part-time, you may be considering borrowing money.
If you are in need of financial support, taking out a student loan is one of your options. But before you borrow money from the government or a private lender, you need to understand the ins and outs of the loan you are applying for.
It’s important to do your research before deciding which type of student loan to take depending on your needs. Here are 10 questions that you must ask lenders before taking out a student loan.
What are your interest rates?
Interest rates accrue over time and can cost you a lot of money. Ask your lender if the interest rates are variable or fixed. A variable interest rate is one that changes on a monthly or yearly basis. Inquire about the interest rate change when you’re still studying and after you finish your program.
Your interest rate may also depend on your credit score, so ask your lender if a cosigner is necessary.
What is the loan term?
Ask about the terms and conditions associated with a loan. This includes repayment period, interest rates, monthly payments, and penalties.
Who is eligible for this loan?
Ask if you’re eligible to apply for student loan programs. In some cases, your eligibility for a loan can also determine your eligibility for different repayment plans, like income-based repayment plans.
Are there loan limits?
Most federal or government student loans have annual loan limits. Tell your lender to disclose loan limits to you, so you can calculate if the loan could suffice for your studies.
When am I required to start paying?
Ask your lender about the period when your repayment schedule starts. Also, ask if you could make payments earlier than the required date – it’s always a good idea to start paying off your student loan early.
What are the fees?
Default fees. Origination fees. Repayment fees. A lot of fees are associated with your loan. Request your lender to be transparent about these fees. You have the right to know what every cent of your repayment is for.
What are the penalties for this loan?
Student loans have associated penalties, the most common of which are penalties for late or missed payments. You need to know the circumstances when penalties are imposed and how these would affect your loan and repayment.
What do I need to do to complete an application?
Borrowing money involves the completion of required documents. Ask your lender about the necessary steps to complete and submit an application. If an application has a deadline, ask about it too.
Are there any circumstances where the payment amount can be reduced?
A lender may give you a fixed amount for monthly repayment, but there will be cases where your lender may consider reducing your payment amount. Your lender may be more considerate to you if you offer to pay early, or pay higher than the agreed minimum amount.
What happens if I default and what can I do to prevent that?
Defaulting a student loan can have serious consequences. Ask your lender ways on how to avoid falling into default, and what actions to take immediately if you fall into one. As a general rule, it’s best to pay on time and on schedule to prevent defaulting a loan.
If you’re planning to fund your college education with student loans, ask your lenders important questions regarding the loan. Inquiring about loan eligibility, repayment plans, and interest rates is necessary to ensure you can make informed decisions when borrowing money for your studies.
MSM Unify provides you with the information you need about international education and education financing options. Read our articles to learn more.
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