May 14, 2022

by Ella Watson

If you borrow money to finance your education from Credit Unions, you do not have to shop around. You just submit the application form, and the process begins, but if you are looking to borrow money from a private student loan lender, you cannot make the decision so quickly.

About 13% of students in Ireland borrow money from private lenders to finance their education. There could be several reasons for being unable to qualify for government-backed student loans. When you borrow money from Credit Unions, you do not have to pay it back unless you start earning over and above minimum wages.

Payments are decided based on the income-contingency scheme. However, when you borrow money from a private lender, they will not wait for the completion of your course. In fact, the loan amount is decided based on your earnings. Private student loans work differently from government-backed loans, and therefore, you will have to consider a lot of factors before.

Tips for finding the best private student loan lender

Here are the factors you should look at to make a decision:

Interest rates:

Interest rates vary by lenders. They are usually mentioned on their websites, but the actual interest rate depends on your credit score, income, total loan amount, and additional debt. You will likely suffer from higher payments if you do not heed them.

The lender lends money at fixed and variable interest rates. Look at the following table to know the difference.

Fixed interest rate Variable interest rate
The interest rate will be the same till the loan settlement. The interest rate will keep fluctuating as the base rate fluctuates.
Fixed interest rates will generally be higher compared to variable interest rates. In the beginning, they can be low, but they keep rising over time.
Fixed interest rate Variable interest rate
The interest rate will be the same till the loan settlement. The interest rate will keep fluctuating as the base rate fluctuates.
Fixed interest rates will generally be higher compared to variable interest rates. In the beginning, they can be low, but they keep rising over time.

What can you do to get affordable interest rates?

Follow these tips to avail of affordable interest rates:

  • Build your credit score. If you do not have a credit history, you should take out a credit builder loan. If your credit history is not stellar, improve it by clearing your outstanding accounts.
  • At the time of applying for a student loan, you should not have additional debt. It may reduce your repaying capacity and increase the debt-to-income ratio.
  • Fixed interest rates are more affordable as you can prepare a budget. You will know how much you are to pay every month, so there are fewer chances of falling behind payments.
  • Keep monitoring your credit report to ensure you are not the victim of identity theft or it does not have any errors about your details.

Fees

Apart from interest rates, fees add up to the cost of student loans. The APR involves interest rates and fees. Each lender has its own fee-charging system.

Some lenders may charge higher fees than others, and hence the APR could be higher. Monthly fees, set up fees, late payment fees, and early repayment fees can quickly increase the cost. BizCreditLender does not charge early repayment fees on student loans in Ireland, while other lenders do.

What can you do to avoid paying high fees?

It can be hectic to choose a lender that charges low fees. Most of the time, they do not mention it on their websites. You will likely get to know about it when you sign the loan agreement. Here is what you can do:

  • Apply for a pre-approval letter. This will let you know the amount they can lend you, interest rates, and fees.
  • You can get it from multiple lenders to compare, so you choose a deal with the lowest interest rate.

Repayment terms

A repayment term can affect the total cost of your student debt. If you borrow a very small amount of money, for instance, not more than £500, you will pay it in a lump sum as you do in case of taking quick loans.

If you borrow a large amount of money, it will be paid down over a span of time. If you choose a smaller repayment term, the monthly installments will be slightly higher, but you will save money on the total cost.

Grace period

It is a period when your payments are not due. Government-backed funding sources will allow you to start making payments after completing your course, provided you are earning more than the minimum wage. Lenders rarely give the grace period facility, and if they allow for it, interest will keep accruing.

Alternatives to private student loans

If you cannot qualify for private student loans, you ould consider the following alternatives:

  • Seek help from your parents

Borrow money from your parents. Even if they want it back, they will not charge interest. No fees will be levied on you, and you will repay them when you have enough money to do so.

  • Personal loans

You can take out a personal loan based on your part-time income source. If a lender does not approve, you can have your parents as a guarantor. The lender will likely lend money based on their financial situation.

The bottom line

If you are looking to take out a private student loan, you should look at the factors such as interest rates, APR< fees, repayment term, borrowing amount, and grace period.

Try to consider alternatives like funding from your parents as this is the best and most affordable option to finance your education.

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