The good and the bad: are private student loans right for you?

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College is an exciting period of your life. But sometimes it can be nerve-racking when scholarships or financial aid won’t always cover tuition completely, making you consider alternatives, such as private student loans.

And with the average total student loan debt at $19,500 for a public 4-year bachelor’s degree, according to The College Board’s 2013 Student Aid Report, it’s important to make sure you weigh out the pros and cons of private student loans before you start filling out the paperwork.

The Good

Lower interest rates

When you’re taking out a loan, the last thing you want is high interest rates. With a private loan, you may receive lower interest rates than with a public loan, which is always a plus.

Good grades matter

There’s a reason mom and dad always told you to make good grades—it affects payments on your loan. Some private loan lenders will offer additional discounts, such as reducing your automatic payments, just for having good grades.

Shorter wait time

When you need your money disbursed as soon as possible, then private loans are a good option. In fact, application processing and disbursement of funding are much shorter for private student loans than for public loans.

The Bad

Mandatory credit check

Do you have no credit or bad credit? If so, then you’re going to have a tough time applying for a private loan. Private loan lenders require a credit check before a loan offer is even made. And if you haven’t established any credit yet, you’ll need a cosigner to complete the application process.

Less forgiving

If you go through a time where you can’t make payments on your loan and need a grace period, deferment and forbearance may not be offered by private loan lenders. Keep this in mind during the months after graduation when you might still be looking for a job.

Variable interest rate

Interest rates are not fixed and often fluctuate with a private loan. So if you’re expecting a consistent interest rate throughout the years of repayment, you might want to reconsider a private loan.