What are the loan benefits?
Student loans are offered by governments and banks to help finance a student's educational expenses. If you're in financial need, it can seem like an offer too good to pass up. But these days, there are actually a number of different kinds of financial aid that are available for students, and they all have their own benefits - which is why it's important to do your research before signing on the dotted line.
That's why we've put together this post all about what loan benefits are available and how they can benefit you, plus what some schools may not tell you when it comes time to pay back your debt! This way you can avoid any costly mistakes down the line.
What are the different kinds of loan benefits?
There are four main types of loan benefits available for students. These include:
Collateral Loans - If you're taking out a student loan, you may be required to put up your car, house or other assets as security for the money you're borrowing. Borrowers do not lose their driving license or home insurance if they have to put your car up as collateral. However, it is important that you understand what happens if someone else drives your vehicle while you're away (or worse, if someone takes it without permission): Your bank will keep the borrower on the hook financially for this damage. If the bank can't get their money back, they will collect from your car itself.
Cost of Living Loan - These are basically loans that help cover certain expenses like housing, food and transportation. They're often similar to a jumbo student loan so this is something you should consider. The main difference is that these kinds of loans are not paid back until you've been out of school for at least ten years (this means you don't have to repay them while in school). In fact, most of these loans are automatically forgiven after 10 years of timely payments.
Direct Loans - Direct Loans allow you to borrow money without the need for collateral. Borrowers will be required to repay the loan over a period of 15–25 years but the repayment is based on your income, not your assets. Unlike collateral loans, you do not lose driving privileges when you take out a direct loan: If you're convicted of a felony that involves criminal misuse of personal property or injury or death to another, it can affect your eligibility for federal student loans.
Subsidized Stafford Loans - This type of loan is not only available to undergraduate students but they are also offered at different levels for graduate students with exceptional financial need. All federal subsidized student loans are really need based. This means that you don't have to pay interest on them while you're still in school, through the grace period and during deferment periods.
What kind of loan will you get?
While your school can help you decide what type of loan is right for your needs, it is important to note that if you have a specific kind of loan in mind it may not be offered by every school as every student's financial situation is different. The range of options may also depend on whether or not the school has a lending partner or if they directly offer the loans themselves. You will also want to consider which method works best for your life situation before going into debt with a student loan.
Opting for a collateral loan, for example, means that a private or government institution will take possession of an asset of your choice (like your car or house) in return for the funds to pay for school. If you default on the loans, they can repossess it and sell it to recover the money they're owed. This kind of loan also makes it difficult to get a home equity line of credit: If there's a lien on your home, you can't add another one unless you pay off the first.
Subsidized student loans are more flexible since there are no additional terms or conditions attached to them. It is also easier to apply for an internal consolidation or refinance your loans because the interest rates are lower. This kind of loan also makes it easier to get a home equity line of credit: If there's a lien on your home, you can't add another one unless you pay off the first.
Which loan will you pay back?
When deciding which kind of loan you'd like to apply for, it is important to consider how much money you intend on paying back (the amount at which your loans are forgiven) versus how much interest you'll have to pay (you can use the Federal Student Aid government estimator tool). It's always a good idea to start off with the least expensive loan and try to get a lower interest rate.
There are some very good articles available on Student Loan Hero that can help you navigate your way through this process. This article is just an overview of the four main types of loan benefits available and how they can affect you. However, it's important to note that each type of loan will come with its own set of rules, features, fees and conditions that you should carefully consider before applying. Read them all carefully to make sure they are right for you!
Title: What are the loan benefits?
This article was written by Alexis Perry, who helps people manage their finances through her website Student Loan Help Center . She is not a professional financial adviser, and should not be treated as such.
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Conclusion
I hope that this article has helped you to understand how the student loan system works. You can check out our partner site, Student Loan Champion , to read more about planning, understanding your financial aid award and all the different kinds of student loans out there! If you have any questions or concerns about this article or anything else feel free to comment below. Thank you and good luck with your educational goals!
Before signing up for a loan please make sure you understand what your rights are as a non-borrower. You can always contact us at contact@studentloanchampion.com if you need any help.