Personal Loans

Some students choose to finance their undergraduate education through personal loans. These loans can be especially helpful if you have already received the maximum funds you're allowed through other lower interest educational loan programs.

Obtaining a Personal Student Loan
Unlike Stafford and Perkins Loans, the interest rates on personal student loans are based on a person's credit history and employment record. If you have poor credit or have never used credit, you may need a co-signer. A friend or relative can be a co-signer on your loan. Remember, however, if you default on your loan or make late payments, it will negatively affect your credit and your co-signer's as well. In some cases, your co-signer can be held liable for repayment of the loan.

The interest rate on personal student loans is often comparable to the rate you would receive on a credit card: the better your credit, the better your rate. Some personal loans offer interest-only payments, which might be especially helpful while you are still in school.

Your Interest Rate also Determined by Major
While credit history has a large impact on the interest rate you'll receive with a personal loan, your major might also be a factor. If you're studying toward a degree that could land you a high paying job down the line (law, medicine, business), you might receive a better interest rate. Your choice of major could also affect the amount you're allowed to borrow and could even be a deciding factor in whether you're eligible for a loan.

Finding the Right Private Lender
You might want to start at the bank where you or your family has an account--mortgage accounts, credit card accounts, and checking and savings. Often, banks give discounts to customers and their families. Shop around. Sometimes, online lenders can offer more competitive rates than local banks, although keep in mind that it might be more difficult to reach customer service. To find the best loan for you, check out rates and services with at least three different lenders.