When it comes to funding vocational and/or higher education, most students will first seek out government loans and scholarships to finance their studies. However, for many people and for many reasons, these pathways aren’t always an option or they simply won’t cover the full amount of the tuition. When this happens, many students choose to turn to private loans and there’s nothing wrong with that – as long as you know how to discern the good offers from the bad.

Private loan providers come in all shapes and sizes, but not all of them are created equal. When deciding to take out a private loan there are several factors you need to consider – these are our top three.

Fees

Before deciding anything, confirm what type of fees your prospective loan provider may have built into their financing. For instance, some companies charge early repayment fees so you have no choice but to pay the loan off slowly even if you can later afford to knock it out in one go and save on interest. Another thing to look out for is origination fees or up-front loading. These are common and can be a reasonable one-off payment or a percentage of your loan amount that generally gets built into your loan fee. You’ll also want to consider things like your prospective loan providers policy of defaulting on your loan repayment, late payments, returned payments, deferred payments, etc.

Interest rates

This is key. Your loan interest rate will determine how big and how fast your overall payment will be. This is often determined by several things, including your creditworthiness. Even if you go on the loan companies website and it states a low interest rate, it’s important to understand that this is often the best case scenario. That means that it will only be offered to those in the right circumstances, whereby they have the best credit or have a co-signer with excellent credit.

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To find out exactly how much your interest rate will be with a particular loan company, you’ll need to speak directly with them so that they can make a decision based on your information. If possible you should try and compare a few different private loan options in the same month as lenders doing an inquiry on your score can drop the points a little and impact your credit – but that usually takes 30-days to show up.

Accreditation

This one is a no-brainer. Make sure that your loan provider is legit and has a valid Australian Credit Licence. Their license number will likely be listed on their website, so you can easily look it up. Having a valid Australian Credit License means that they must comply with the National Consumer Protection Act 2006 (Cth), the National Credit Code and must meet ASIC’s requirements in relation to consumer lending. This protects your student loan rights.

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