A student loan can help you get to graduation day.
A student loan can help you finance the high expenses of a college education. There are loans offered by the federal government, by private companies and educational foundations. The school of your choice may also offer a loan to help pay the cost of tuition and fees. The terms and interest rates of the loans vary, as do the loan limits, which in the case of federal loans are set by law. Many students find they have to combine loans with scholarships, grants and wages earned by working part-time in order to afford their education.
Secured and Unsecured Debt
In the lending business, loans fall into one of two broad categories: secured and unsecured. In a secured loan, property is pledged as collateral for repayment of the loan. A mortgage loan, for example, is secured by the house that is purchased with the loan. An auto loan is another example of a secured loan. If the loan is not repaid, the lender has the right to seize the collateral, whether it is a house, a car or other property.
Student Loans
To obtain a student loan, you do not have to pledge any collateral. In other words, the student loan is unsecured. You still have the legal obligation to repay the loan, however, as a student loan represents a binding contract between the lender and the borrower. The loan documents will set out the terms of repayment, as well as the interest rate.
Terms
Unsecured student loans often carry interest rates much lower than other kinds of unsecured personal loans. Most do require that you attend school at least half time, and that you attend an accredited college or university. Some loans are deferred, meaning you do not have to begin repaying them until you graduate or end your studies. Others are subsidized, meaning the loan does not accrue interest while you are still a student.
Private Loans
Although unsecured private student loans are also available, they carry higher interest rates because they are not backed or guaranteed by the federal government. These loans often demand cosigners, who will be obligated to meet the payments if you fall behind. In addition, student loans must be repaid even in the case of bankruptcy, as by federal law student loans cannot be discharged by a bankruptcy court.
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