Banks that offer student loans that aren’t government-backed are still a relatively new thing to the student loan circuit. Up until recently, banks weren’t really allowed to offer student loans of their own, and they also weren’t considered to be that good of an option for most would-be college kids. Bank loans can be easier to get, and also can help out students who don’t qualify for a government-backed student loan. However, that doesn’t mean that you should really trust the banks that offer student loans.
The Banks That Offer Student Loans
Many banks currently offer student loans, even to those who don’t have a credit score, or have a low score. Wells Fargo, Discover, Chase, and Citizen’s Bank all offer student loans. As a general rule of thumb, if the bank in question is a national bank and not a local bank, you will probably be able to get your student loans there.
It should be noted that small banks are offering student loans in increasing numbers. These private loans are a godsend for high risk students. Along with smaller banks, credit unions are also beginning to bestow student loans for students who have low credit scores.
The Big Problems With Banks That Offer Student Loans
Banks need to make a profit. They are businesses, not government financial institutions. This means that they will need to charge a lot more interest to make ends meet when they lend people money. A typical government student loan will not exceed a 6.8% APR maximum. This is actually a very reasonable interest rate, and won’t impact your student loan monthly payments too heavily. They even give students a 0.25% APR discount if you pay automatically through an Electronic Debit program that they offer. Banks don’t offer these kinds of perks because of the fact that they are for-profit institutions.
What’s more worrisome is that it’s only the tip of the iceberg.
- Banks that offer student loans don’t offer them at fixed rates. This means that seeing that advertisement for student loans as low as 2% doesn’t mean as much as you think it does. The banks’ loans are loans that can be changed on their terms, when they want to change them. You don’t have any real laws that protect you from price gouging in that sense of the word when it comes to student loans.
Wells Fargo is a bank that offers fixed rate student loans. The APR vary from 7% to over 14%. Compared to government-backed student loans, that’s a very, very steep price.
One should also take into account the amount that a student’s FICO score will matter when they apply for a student loan at a bank. FICO scores, also known as credit scores, might not matter as much in a government-backed student loan application. A person who doesn’t have a good FICO score to begin with will have to pay a lot more at a private bank. This in turn will cause them more financial troubles, which will keep their credit score low.
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As most people in the financial district know, the US’s credit score was downgraded recently. The downgrade means that you should expect higher rates in the future. This is not good news for people who have variable rate student loans.
Private student loans are also much more difficult to refinance or consolidate. They don’t normally qualify for the same programs that most students use to consolidate their loans after they graduate.
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As a general rule, banks that offer student loans also expect students to start paying immediately after graduation. The monthly payments that you can expect will be a lot higher than government loan payments would be.
Small banks which offer student loans don’t have as much capital to lend as major banks. However, it’s the small banks which have lower rates.
A lot of the banks that are giving students loans for their studies don’t really have an official student loan program. They aren’t equipped for that amount of red tape, and their rates reflect it as well. The service that you get at a smaller bank will be a lot more generalized than the service that you would get at a bank thank has an official student loan program.
Why Approach Banks That Offer Student Loans?
The main reason why students use banks to get their student loans isn’t because they want to – it’s because they have to. Sometimes, you need to approach banks that offer student loans. Not everyone can work their way through college, and not everyone will have all the money saved up in a college savings account. There are people who won’t qualify for the loans government institutions offer for students, and in those cases, saying no to college might not be an option.
People who cannot qualify for government-backed loans often have to approach banks that offer student loans in order to go to college. Students who might have had a credit card accident or two, and don’t have a good FICO score for certain loans, are also very likely to find their financial savior in the form of a small bank that offers them a student loan.
Warning Signs About Private Lender Student Loans
Not all banks are equal in terms of quality, honesty, and financial aid. Some of the banks that offer student loans are actually very good options for people who need more money than the government is willing to give them. They can have decent rates, flexible payment plans, and even offer students valuable advice when it comes to student loan payment. However, there are some banks that students often wince when they hear their names. Is the bank that you’re contemplating borrowing from offering you a deal you should refuse?
- Does the bank have a very poor reputation when it comes to giving loans of other kinds (mortgage, car, personal) to customers? If they aren’t treating their other customers well, then you probably won’t get stellar service, either.
How does the rate compare to other banks’ offers? There is nothing wrong with knowing the current rates, and if you see a sky-high rate from one, you should reconsider agreeing to that loan.
If a bank is giving you a hard sell, you should immediately wonder why they are so desperate to get their hands on your money. Plenty of students need loans, so they shouldn’t have to beg you to sign. Some selling is normal, but if it’s enough to make you feel unsettled, you should be worried.
Banks that offer student loans need to be legitimate banks. FDIC insured banks are a good place to start searching. Learning about the bank’s history is a good way to find out whether or not it’s a real bank.
No bank that is legitimate would ever try to force you to agree to the student loan they are offering without letting you check other banks’ loan offers. This isn’t only a sign that you shouldn’t take the loan. This is a sign that the bank might be doing illegal practices that cost struggling students thousands of dollars.
Separating The Good Banks From The Bad Banks That Offer Student Loans
The easiest way that students can find great banks that offer student loans is to research them. Plenty of reviews and internet sites rank banks that offer student loans, and explain why each bank is a good (or bad) option to consider. They can tell you volumes about which local banks offer students the most money, which banks offer student loans at reasonable rates, and even which banks are known for their excellent customer service. Doing your homework isn’t only something that you should do during school. It’s something that you should do for any major purchase or loan.
Before you choose a bank to accept your student loans from, it’s a very smart idea to check their reputation with the Better Business Bureau. Unlike some sites, which may receive special bribes in order to favor one bank over another, the BBB is a completely unbiased organization. You can learn about the complaints others have filed on the site, and also learn what the company has done in order to settle those issues. Using this method of research can also tell you whether or not the bank that you want to get your student loans from is actually a legit bank, as well.
College loans are no laughing matter, and the banks that offer student loans are well aware of how important student loans can be to college attendees. Getting a loan from a private bank can be risky if you don’t know all the details about the student loans they offer. However, if you research the banks that offer student loans, you will find a student loan which will have the rates you need, the flexibility you want, and the service you deserve.
