Unsecured Student Loans

As the student looks towards financing college life they are about to embark on the world of personal loans, which will most likely be the first time they have dealt with such things. The world of student loans comprises mostly unsecured loans, as youngsters will not have sizable assets of their own to put forward as collateral to secure a loan.

Most likely only a mature student returning to education will have any collateral. Thus unsecured loans are the norm for student loans and this is extremely beneficial as future assets will not be required for collateral after graduation.

The federal government has a number of guaranteed student loans which are the first means of borrowing for all students, and have fixed lower interest rates than private student loans. They are totally independent of credit checks too, which is necessary as few students will have had chance to build a credit history of their own. They are unsecured as the government grants these loans without requiring any collateral. Even those with bad credit may receive federal student loans. 

The government guarantees these federal loans so that all students have the potential to receive a college education, regardless of family assets. Repayment terms are favorable. One of the ways these loans can help with your financial future is that although they are received without a credit check, repayment of them is reported to the credit bureaus, so you can use them to establish a good credit history when you start to repay them.

When federal student loans aren’t enough to cover all college expenses, as in many cases, a private student loan is also needed to cover the shortfall. These too are unsecured personal loans but are dependent on a credit check. They are not granted to students with a bad, or no, credit history, which is why they almost always call for endorsement from a third party as co-signer.

The downside of private student loans is that as they are unsecured the risks are higher, particularly as the student themselves are most likely an unknown risk, thus the interest rates will be higher than on federal student loans. Fees will most likely be attached to such loans too so the student must shop around for the best deal.

The interest rates are usually variable so one is never certain of the total cost in advance. They can be consolidated later with other private loans but not together with federal loans.

Guaranteed fixed rate federal student loans are one of the best unsecured personal loans available and the student should always take them as first choice for financing college. Handled in a responsible repayment way the lender may agree to release the co-signer from private student loans after three years.

Student loans are in most cases a necessity for college and allow the student to pursue an education leading to better opportunities. Just be aware that when college days are finished the loans must be repaid, and unlike other debts student loans are never discharged. Handled well they could be the first step towards establishing a good credit history which will assist later on with better deals on secured loans such as home loans.