How To Choose A Private Lender
Choosing a lender is as easy as 1 - 2 - 3!
1. Getting Started
Private loans are funded through a lender, and choosing a lender is an important decision - it involves a financial obligation that will be a part of your life for many years to come. Choosing the right lender can seem like a daunting task, but it doesn't have to be. We suggest first asking someone you trust for a referral and checking out any business where you have a bank account(s). Then, take the time to compare a few different lenders to determine which one is right for you. You may choose any educational loan lender you prefer. Remember to always take advantage of your federal loan options first.
Below is a historical list of lenders who continue to participate in the Alternative/Private Loan Program and who SLU students have used within the last three years. The University does not endorse any specific lender. You may choose any educational loan lender you prefer.
2. Be Financial Aid Savvy and Do Your Research
Before you apply for the loan you want to make sure you have done your research. Definitions of loan terms you should know before applying:
- Master promissory note - this is the agreement between you and the lender that you will re-pay the money when you graduate or fall below part time status. This is a legal contract. Definitely keep a copy for your records.
- Interest rate - The interest rate for the Stafford loan, Perkins loan and PLUS loans are fixed. For a private loan the interest rate will vary. While you may see a low interest rate on a lender's website keep in mind that the low interest rate may depend on qualifying for the lender's benefit program.
- Loan fees - Some lenders will charge you an origination fee to use them as a lender while others will not. Remember that no origination fees do not save you any money in repayment, but you will receive more money up front.
- Interest rate reductions for using automatic payments - Some lenders will reduce your interest rate if you repay your loan through pre-scheduled automatic bank debits. Although the reduction in interest rate varies, the reduction is typically 0.25%.
- LIBOR - a term used for private student loans. This is the 3 month average of the London Interbank Offered Rate. LIBOR is the average interest rate paid on deposits of US dollars in the London market. APR - the Annual Percentage Rate, a rate that factors in the interest rate, fees, and other terms.
- PRIME - the Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers.
- Loan limits - The aggregate loan limit for the Stafford loan is specific to the type of student you are. For private loans, the aggregate limit is based on each lender's terms. This is the maximum you can borrow per year, as well as your entire time in school.
- Repayment Terms - This is the amount of time you have to pay back the loan.
- Postponement options - If you need to postpone making payments, you can take advantage of deferment and forbearance options. Call your lender to learn more.
Know what questions to ask/what to look for. Some questions you may want to ask are:
- How often do you capitalize interest during postponement periods?
- What are your repayment benefits? What percent of borrowers receive these benefits?
- What do I have to do to receive these benefits and how are the benefits lost?
- If I borrow $10,000 over my college career and I receive all these benefits, what will be the total dollar amount I will owe by the end of my 10 year repayment?
- If I borrow $10,000 over my college career and I receive NONE of these benefits, what will be the total dollar amount I will repay by the end of my repayment?
- Do you have a history of selling your loans?
- How long have you been originating federal Stafford loans? Private loans?
- What kind of debt management education do you provide?
- How quickly can I talk to a real person when I call? How long am I on hold?
- Is the lender able to provide insight and borrower education from pre-enrollment through repayment?
** Read the fine print. Make sure you know all you can about the lender and loan you are taking out. **
3. What Happens Next?
You have selected a lender, now it is time to apply using their website! Did you know that peak processing begins before school starts in the fall? Our sample timeline will guide you through the loan processes of how and when student financial services office will deliver your loan funds.
Private Student Loans
Spring - Shop around for your lender.
June - On your lender's website complete, the application/promissory note. Please note, at that time your co-signer must also complete his/her portion of the application. Follow up with your lender 4-5 days after completing the application. This is the time to verify that your application is complete and that no further information is required (Common missing items include a copy of a driver's license, pay stub, or co-signer signature).
July - The lender will notify SLU and our office will begin the process of certifying your student loan.
August - Approximately, 10 days prior to the first day of your academic term, you will receive your loan funds (See the Bill Payment Suite as you may be able to receive your refund as direct deposit).
Please note that individual loan providers have their own applications and timelines.
Plan to apply at least 45 days prior to the date the bill is due.