A certified private loan or certified private student loan is a private loan that is offered to students through higher learning institutions i.e. colleges and universities. Learning institutions are usually aware when students are given private student loans thus the institutions offer help in terms of managing student loans. Institutions also help to negotiate better interest rates for students among other benefits i.e. more flexible repayment terms e.t.c.
Certified private student loans supplement students sources of finance when financial aid options such as; scholarships, federal student loans e.t.c. have been exhausted or are not an option. With certified student loans, students can be able to cover a huge percentage of their college expenses.
Types of certified private loans
There two main types of these loans namely; subsidized and unsubsidized certified private student loans. Subsidized loans are usually offered according to the financial needs of a student, while unsubsidized loans don’t consider the financial needs of a student. It is important to note that subsidized student loans don’t attract any interest before the repayment time period. Unsubsidized private loans however attract interest rate right from the time the loan is given.
Benefits and features of certified loans
The loans attract a 0.25 % interest rate reduction if you sign up for automatic repayments i.e. loan repayment amounts to be deducted directly from your bank account. It is important to note that the interest rate for certified private student loans is calculated using the libor or prime rate plus/minus a margin. The rate may therefore fluctuate depending on base rate changes. The loan funds are sent directly to your university or college. The loan is issued 100% of cost of attendance based on certification and any other aid. The loan requires reference and co-signer information.
To be eligible for a certified loan, you must be a United States citizen or have permanent residency. You must also be enrolled in a university or college for a 4 or 5 year degree program. You also require a co-signer for your to be eligible for a loan. Your co-signer must pass credit checks i.e. have a good credit score/history.
Certified private loan repayment options
There are three main repayment options for certified private student loans including; repayment of interest only, repayment of interest and principal and deferment.
1. Full deferral: For this repayment option, no interest or principal payments are due while you are still enrolled in school. Payment of the interest and principal usually starts 6 months after graduation or 6 month after withdrawal from school. Interest continues to accrue during deferment period and becomes capitalized at repayment.
2. Interest Only: For this repayment option, students pay accrued interest only while enrolled in a university or college. The principal and interest payments usually begin 45 days after graduation/ withdrawal from school.
3. Immediate repayment: For this repayment option, payment of interest and principal begins immediately after the student loan has been fully disbursed.
Certified loan repayment term
Typical certified loans are repaid in 25 to 20 years. Most loans attract a minimum monthly repayment of $50.