The Keys to Obtaining and Refinancing Your College Loan

How many of you are biting your nails trying to figure out whatyou should do to get your college paid for? You know you need aloan... but what kind? What are the differences? Would it be agood idea to refinance or consolidate any loans you alreadyhave? Is this the right time? How much do you really need? Whatdo college loans cover? If you're wondering about these things,please read on.Before you run out and get a college loan, you first need toknow how much of a loan you are going to need. Of course, theobvious part of the loan is your tuition and the cost of yourcourses. But there are many other things that you may need tohave covered through your college loan. This can be your roomand board, school supplies, lab supplies, books, etc. But thisjust pertains to your actual schooling. There are other thingsyou need to take into consideration. This can be car insurance,gas, transportation, health insurance, food, etc. You need toadd all of these factors up for each year. Then, multiply it byhow many years you are to be in college. This will give you arough estimate of how much money you will need.Some college loans can be used for anything. The lender couldn'tcare less as long as you pay it back. If you plan on getting apart time job, you can count on part of your paycheck being usedtowards things that your college loan does not cover. Howeverremember you'll need to keep part of your paycheck to pay yourmonthly college loan payment!Now we shall go over the several types of college loans outthere. A little later, I will explain about refinancing acollege loan. First, we will go over federal student loans. These collegeloans can either be subsidized or unsubsidized. Subsidized loans are when the government pays the interest ofthe loan for the students. You must show that you are in greatfinancial need in order to get this type of loan. Unsubsidized loans are when the student must pay the interest,but the interest is not deferred until after graduation. Anyonecan get an unsubsidized loan. Both of these types of federalstudent loans are the most commonly used.The next are private student loans. Private student loans aregiven to someone with a good credit score. They can be used foranything, not just the cost of tuition. They are also unsecured.This means they require no collateral, but they have extremelyhigh interest rates. Now, we go to for parent loans. As you guessed, this is a loanthat parents can take for the full amount of the collegetuition. You just have to hope mommy and daddy are willing to dothis for you! The payoff rate and interest rate is much lowerwith this type of loan, often because parents have good creditand the funds to pay the loan off.Now we come to consolidation loans. This type of loan is used toconsolidate all of a student's loans together so they can bepaid off in one easy payment plan to one lender, rather thanhaving several payments to several lenders. Many students end upgetting this type of college loan after they made the mistake ofgetting too many college loans at once.Those of you, who do already have a loan, may be interested inrefinancing. Refinancing college loans often seems like a goodidea, and it is...if you use it to your advantage. I'll explainthat in a minute. First, you need to understand a few things.Most college loans are of a variable percentage rate until therate is locked. You lock a rate by means of a loan consolidationor by refinancing. When rates are very low, it generally is agood idea to attempt to get your loans or loan consolidated orrefinanced.Before you can even think of refinancing, you must know that isonly offered to you good people that have always made theirmonthly loan payment on time. If this does not sound like you,then I wish you good luck trying to refinance! Refinancing rates are usually one or two percent lower than youroriginal college loan rate. Refinancing rates can save you up to60 percent. But this is where the possible drawback is - andmost people simply don't realize. The "drawback" is a hidden one - that most people never see. Inorder to get your college loan payment lower throughrefinancing, you are given a much longer time period to pay theloan off. Instead of 5 years to pay it off, it can turn into 20years to pay it off! This may sound good to you in thebeginning. At the time, it will leave you with extra money thatyou may be in need of for other bills. But in the long run, itjust costs you more money because you will be paying interestmuch longer to the lender. In fact, it can cost you thousandsmore! The smart way to do it is after you refinance and obtain thelower rate; pay more towards the monthly bill. This way you willpay off your loan much quicker than normal and at a cheaperrate. But only put more towards paying it off when you canafford it. Remember you refinanced your college loan because youcouldn't afford the payment to begin with. So now you'verefinanced just pay off your loan as best you can at your ownpace, bearing the above in mind.I hope I didn't scare you too much. The important thing you haveto remember is that most lenders gain money from you through theinterest you pay them. If you pay your college loan off faster,you will make the lender less rich! Take a breather and use yourhead before you jump into anything. In other words "look beforeyou leap". © Luke Sharp 2005