Private student loans, sometimes known as alternative loans, are made by private lenders such as banks, credit unions, and financial institutions. Private student loans are based on credit, and are most often used to fill the gap between the cost of attending college and family savings, scholarships, grants, and federal student loans.
Both private student loans and federal student loans allow students and/or parents to borrow money to pay for education expenses. While there are many differences between the two, the primary differences are:
Learn more about federal student loans.
To determine if you’re eligible for federal student aid, you must first complete the Free Application for Federal Student Aid (FAFSA), which can be found at fafsa.ed.gov. The amount of financial aid you are eligible for is based on the Cost of Attendance (COA) for your school minus your Expected Family Contribution (EFC).
Cost of Attendance (COA) is the estimated total cost for a full-time student to complete a full academic year at a college or university. The COA typically includes tuition and fees, books and supplies, room and board, transportation, and miscellaneous personal expenses. The COA is published each year, and sets the limit for qualified financial aid and student loans that may be available to a student.
Expected Family Contribution (EFC) is an assessment of how much a family is expected to contribute toward a student’s college costs. The EFC takes into consideration several factors including family savings, income, number of family members, and number of family members in college. The information provided on the Free Application for Federal Student Aid (FAFSA) is used to calculate the EFC.
School certification is the process by which a school verifies that a student is enrolled on at least a half-time basis, is making satisfactory academic progress, and is eligible for federal and/or private student loans. School certification must be made prior to any disbursement of loan funds.
A variety of factors influence private student loan interest rates, including the type of loan, the credit history of the borrower and cosigner (if applicable), whether it is a fixed or variable rate loan, the base interest rate index used, the repayment term chosen, and whether principal and/or interest payments are deferred.
The interest rate for a variable rate loan is the sum of the base interest rate plus the loan margin. Most lenders use either the 1-Month LIBOR (London Interbank Offered Rate), 3-Month LIBOR, or Prime Rate as their base interest rate index for variable rate loans. The loan margin remains constant throughout the entire life of the loan and is determined when the loan is approved.
Deciding whether to choose a variable or fixed interest rate can be tough since there are advantages to both options. Variable rate loans start off with lower interest rates than fixed rate loans with similar repayment periods; however, the interest rate fluctuates as the interest rate of the base index changes. So, your monthly payment amounts will increase or decrease depending on if interest rates rise or fall.
With a fixed rate loan, the initial interest rate is higher, but remains constant throughout the life of the loan, so your monthly payment amount stays the same.
Consider these options to help you decide:
With U-fi’s lender partners you can borrow as little as $1,000 or as much as the cost of attendance at your school, less any financial aid as certified by your school. The aggregate student loan debt allowed is determined by each lender.
Yes, U‑fi’s lender partners offer many borrower benefits such as:
Be sure to check the Details section to see which ones may apply.
While the federal government and some private lenders may charge an origination fee, U‑fi’s lender partners do not charge any application, origination, disbursement, or prepayment fees.
Borrowers need to present a fairly strong credit history. Although a creditworthy cosigner is not always required, borrowers who have not reached the age of majority in their state of residence or who have little to no credit history are encouraged to apply with a qualified cosigner to improve the chance of being approved and lower their interest rate.
A student is considered to be in their in-school period when they are enrolled at least half-time in a degree-granting program.
The grace period is the period that follows the in-school period and begins when a borrower graduates or is no longer enrolled at least half-time. The grace period is typically between six and nine months.
Borrowers who may have deferred their private student loan principal and interest payments while in school enter repayment after their grace period. Once borrowers enter repayment status they are responsible for making full principal and interest payments.
U‑fi’s lender partners offer many repayment periods to choose from, including:
It is important to remember that, while selecting a longer repayment period will lower your monthly payment amount, it will result in you paying more total interest over the life of your loan.
You can prepay your private student loan at any time without incurring any fees or penalties.
Please review our What You Need to Apply section.
Not every school or program participates in, or is eligible for a lender’s program. U-fi’s lender partners typically update their lists of eligible schools and programs prior to the beginning of each academic school year (e.g. April, May).
The amount of time it takes to process a private student loan application varies by school. You should allow six to eight weeks from the time you complete your application to the time your school receives the private student loan funds.
Private student loan refinancing allows you to refinance and/or consolidate one or more student loans into one private loan at a potentially lower interest rate, monthly payment, and/or repayment term.
U-fi’s partner lenders allow you to include both federal and private student loans in your refinance loan. However, before refinancing any federal student loans make sure you understand what important benefits you might lose.
How much you save depends on many factors, including current interest rate(s), your outstanding student loan debt, your repayment term, and your (or your cosigner's) credit history.
With U-fi lender partners you can refinance as little as $10,000, and as much as $300,000, depending on your highest level of education.
Each U-fi lender partner has their own unique set of eligibility requirements. When reviewing a lender’s refinance loan program, be sure to scroll down to review the loan eligibility requirements.
Yes, U-fi’s lender partners allow parents to refinance their federal and private education loans in their name.
Refinance loans enter full principal and interest repayment immediately. The first payment is normally due 30-45 days after the loan is made.
U‑fi’s lender partners offer repayment terms between 5 and 20 years. It is important to remember that, while selecting a longer repayment period will lower your monthly payment amount, it will result in you paying more total interest over the life of your loan.
Personal loans are unsecured debt that are not backed by any collateral, such as a car or house. They are a type of installment loan with a specific repayment period, usually less than 7 years.
The most common reason people take our personal loans is to pay off existing debt, such as high interest rate credit cards or loans. Other common reasons include making major purchases like furnishing a house or apartment, for special occasions like weddings, to take a vacation, and to pay off medical bills.
Private student loans are used for educational purposes only, typically to fill the gap between the cost of attending college and family savings, scholarships, grants, and federal student loans. Personal loans are taken out for a variety of reasons, including paying off debt like credit cards, making a major purchase, for special occasions, medical bills, etc.
If you need money for college or want to refinance your student loans, we strongly encourage you to apply for a private student loan before reverting to personal loans, as the interest rate on private student loans are typically less and there are more repayment options for student loans.
Our partners have loans available in loan amounts ranging from a minimum of $5,000 to a maximum of $50,000.
Like other credit, personal loan interest rates take into account the credit history of the borrower and cosigner (if applicable), annual income, whether it is a fixed or variable rate loan, and the repayment term chose. Check out our partners’ current interest rates.
The interest rate is the cost to borrow money and does not reflect any fees or other charges you may pay for the loan. The APR goes a step further by taking the interest rate on a loan and adding in any upfront costs, such as an origination fee. The APR measures the total cost of borrowing money on an annualized (yearly) basis.
Our partners do not charge any upfront origination, application, or disbursement fees. There are also no prepayment fees if you wish to pay your loan off early.
You, or your qualified cosigner, will need to have a reasonably strong credit score and credit history. A strong credit score is typically 700 or higher.
The minimum annual income required is $24,000.
To qualify for a personal loan, you must have reached the age of majority in your state of residence, be a U.S. Citizen or permanent resident of the U.S., and have a valid social security number. To be approved for the loan, your will need a good credit history and current annual income of at least $24,000.
Personal Loans are credit-based loans, which means when you complete a loan application a hard credit inquiry will show up on your credit report. Hard inquires can affect your credit score and can be seen by third parties that review your report.
As long as your loan application is complete with no missing information, you can receive a credit decision in a matter of minutes.
Once you’ve been approved and accepted the loans terms, as long as there are no errors or typos on your application, funds can be sent to your bank as soon as the next business day. On average it takes 7 days from the time a borrower submits an application to the time they receiver their funds.
The funds will be electronically sent directly to your bank account. You will need to provide a U.S. bank account and the bank routing information.
The first payment is due 30-45 days from when the loan is disbursed. You will receive an email letting you know when your monthly payments are due.
A cosigner is a creditworthy person willing to assume responsibility for the loan liabilities if the borrower fails to repay the loan. Cosigners can help a borrower qualify for a loan and also lower the interest rate. Cosigners must be eligible U.S. citizens or permanent residents.
Cosigners are generally only required if a borrower does not meet certain minimum requirements such as age, creditworthiness, employment, or income.
After a completed application is submitted, the lender will pull a credit bureau report for both the borrower and cosigner, if applicable. The borrower and cosigner’s creditworthiness is assessed based on their credit history.
If the lender offers a cosigner release option, borrowers can request a cosigner release after they meet certain requirements. Most lenders offering cosigner release require a certain number of consecutive on-time payments and proof of acceptable income, and will check the borrower’s credit.
Each person’s situation is different, so there is no clear cut answer when deciding whether a fixed or variable rate loan is better for an individual borrower. However, several factors should be taken into account when deciding which type of loan to select.
|Variable Rate Loan||Fixed Rate Loan|
|Interest Rates||Interest rate is tied to a rate index set by the lender and may change periodically during the life of the loan. The interest rate will move up or down based on fluctuations in the economy.||Interest rate will not change over the life of the loan, regardless of whether market rates go up or down.|
|Cost of Loan||Tend to offer a lower initial rate than a fixed rate loan, but if the interest rate rises it may end up costing more over the life of the loan.||Tend to offer a higher initial rate than variable rate loans, but if interest rates rise it may end up costing less over the life of loan than a variable rate loan.|
|Monthly Payment||Payments can vary as the interest rate changes. Each lender varies on when the payments are updated.||Payments remain the same each month regardless of market rate changes.|