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Questions to ask about private loans

Before considering a private loan, make sure that all federal, state, and institutional financial resources are exhausted. If there are no other ways to fill the financial gap, shop around and do some homework before choosing a private loan. And remember, keep written records of all forms, applications, and correspondence with your lender, especially regarding discounts and special deals, for the entire life of your loan.

What is the lowest interest rate and fee combination that you offer? How can I get that rate? Is the rate only for a limited period (an introductory rate), or for the duration of the loan?

If the interest rate you are offering is variable, is there a limit on how high the rate can go? How often is the interest rate adjusted, and how is it determined?

What rate can I get on a fixed-rate loan?

How long will I be repaying the loan? Is there any penalty for paying off the loan early?

When do I have to start making payments?

How long can I defer payments while I’m in school? What if I go to graduate school after my bachelor’s degree? How often do you capitalize the interest? If I do not make payments while in school, how much will I owe when I do start making payments?

Will I lose my on-time-payment discount with just one late payment or if I ask for a change in the payment schedule? What proportion of your borrowers actually get the discounts you offer?

Are your discounts guaranteed, or are they subject to change later?

If I have difficulty making payments (“economic hardship”), do you allow me to defer or reduce my payments temporarily? Under what circumstances, and for how long?

How much can I borrow without reducing my eligibility for federal, state, or institutional aid?

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