Business & Finance Finance

Important,College Loans: Watch Out Before You Apply

It is always stressful when selecting a college student loan, because there are so many different terms, options and many companies provide very attractive offers.

However, those student loans that seem "too good to be true" are generally just that, so good that something is fishy.

Every year hundreds if not thousands of college student loans are issued that look like a good deal on the surface, but without reading the fine print and understanding exactly what you are getting into you may find out you have cost yourself thousands of dollars in interest or fees over time. Some major factors to consider while looking for particularly private school or education loans include:

Vague information on the interest rate of the loan and how the interest rate will be calculated over the life of the loan. If at all possible look at loans that allow you to lock in the interest rate if the rate is good at the time of the loan. Depending on how the market fluctuates, it can either be a really good or really bad decision to lock in your rate.

Your credit score will affect the interest rate as well as the amount of money you are able to borrow. Be very leery of lenders that promise low rates no matter what your credit score is or if you have bad credit.

While it looks promising, the additional fees, other services, and costs that you end up paying are not so nice. Most commonly, these costs exceed a slightly higher interest rate in the long run.

If a loan has a loophole to get around policies or that provides money for items not related to education, you should avoid these lenders.

Not only is it illegal and against the policies of the Higher Education Act, it also typically is a scam that unsuspecting students get caught in before it is exposed.

While it may not seem important, ask if your loan will be sold, as many smaller lenders do, because this can ultimately leaving you with someone other than the original lender to deal with and possibly resulting in different interest rates and terms.

Along with guaranteeing the original terms will always apply, a reputable lender will also include every aspect of the loan selling in writing.

While it may be tempting to look at some of these newer companies offering college student loans, a proven track record with a positive history of previous students is a much better option to choose.

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