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Representative Example: Borrow £700 and pay £111.27 per month for 12 months at an interest rate of 140% per annum (fixed).
The total charge for credit is £635.24 The total amount repayable is £1335.24. Representative 277.5% APR (variable). Your APR rate will be based on your circumstances.
† Subject to lender's requirements and approval. Not all loan amounts are eligible for 20 minute payouts. Your bank may increase the time you receive the money considerably.

Private Student Loans

Key points

  • These are loans provided to UK students that don’t originate from a government loan program.
  • They can be used for any purpose, however paying off debt and topping up loans are commonplace.
  • Nowadays there are numerous direct lenders online, so it pays to compare to get the best deal.

If the term ‘private student loans’ is discussed, it refers to loans that are not provided as part of any government study loan program. Instead, they are loans that banks and other lending institutions provide for the purpose of funding your tertiary education.

Although you are normally required to be enrolled in some form of college or university study to take advantage of private student loans, some lenders have realised that it is often necessary to borrow money after a student has graduated. As such, many private lenders will now assist in this way.

Before you consider using any type of private student loan, it’s crucial to ensure that you know how they work, what the advantages and disadvantages of them are and how repayment terms will need to be adhered to.

Most of the time, you will be better off trying to obtain government student loans before even considering the option of approaching a private lending institution or bank.

Several government loan initiatives have specific advantages that will not be available in the private lending sector. While some form of trade-off is often required to take advantage of government student loans, the benefits of these loans tend to far outweigh those associated with private loans. As such, it’s strongly recommended that you explore every avenue regarding obtaining government student loans before turning to the private loan market.

Regardless of the type of loan you require, you should always try to borrow only as much as you need. Keep in mind that student loans are quite easy to obtain in many cases, but fairly difficult to repay – you will have to pay every penny back that has been borrowed as soon as you start earning a salary.

Features Associated with Private Student Loans

Some factors that will determine the type of student loan you apply for include:

  • Whether you will qualify for a specific loan or not
  • Amount of funds that are available for students to apply for

Student loans provided by the government are usually easy to apply for and obtain – no form of credit history or proof of income will be requested when filling in the paperwork in most cases. Provided that you’re enrolled in some type of tertiary education, the government will usually be more than willing to lend money to you for this purpose.

On the other hand, a good credit history will be required if you intend applying for private student loans. Owing to the fact that many students haven’t had the opportunity to build a credit history yet, they will normally need to work with a co-signer when applying for these. The co-signer will need to have a good credit record as well. It’s also important that the co-signer read and understands the application and its repayment terms before signing any paperwork.

Although it’s normally easier to qualify for a government student loan, these funds are often insufficient to cover all of your study costs – especially if you intend studying long term. There will be a limit with regards to the amount of money that the government is willing to provide you for student loans and it’s easy to reach this limit when you take the cost of books, accommodation and other related expenses into account.

If you plan on studying at a private college or institution, chances are that you will need a fair amount more funding that that which can be provided through government loans. In many cases, providers of private student loans will allow you to borrow far higher amounts of money at a time.

Additional Differences to Consider

There are a few additional differences between government and private student loan programs.

Student loans obtained from the government normally have lower interest rates and relatively flexible repayment terms – for instance, you may only be required to start repaying these once you have stable employment that pays above a certain amount.

Loans obtained from private lending institutions are often provided with variable interest rates, meaning that it could be challenging to determine exactly how much you will have to repay each month. Repayment terms are often stricter as well in that you’ll have a fixed amount of time to repay them in full.

They type of loan you obtain will also have an effect on how it can be consolidated or refinanced over time. In most cases, private loans will be refinanced, whereas government student loans can be consolidated.

There may be situations where you’ll only be able to cover the full cost of your studies by making use of private student loans. In addition, you’ll normally have to be enrolled at least half time for some study programs if you intend qualifying for government loans – for instance, in a program that leads to you obtaining a certification or degree. Government loan options may also sometimes not be available for the course that you’d like to enrol in as well.

Most students will need some form of financial assistance after obtaining their qualifications as well. Although this may not be considered as being a student loan, this type of funding can be a lifesaver while you’re trying to get your foot in the corporate door.

For example, some courses require you to complete an additional licensing program, fulfil intern hours of pass an additional industry-based examination before you’ll be allowed to receive a salary. Some providers of private student loans will be able to assist with funds in cases like these.

Minimal Paperwork

Many students find that the amount of paperwork needed when applying for private student loans is a lot less than that which is requested when applying for government loans.

Any type of government student loan that is being applied for will require additional paperwork that must be completed. Information needed when applying for these loans includes your family’s financial history and other personal data. Some families aren’t comfortable sharing this much personal information though, meaning that they will prefer to opt for private loans.

Private lenders are able to offer loans without a lot of personal information and a financial history being requested. As such, less paperwork will need to be completed when applying for these loans.

It’s important to remember that you will usually only qualify for private student loans if you have a good credit history and you can prove that you’ll be able to make the required repayments on time. If you have a co-signer, it’s crucial that they understand their responsibility in this regard as well.

Government student loans are often accompanied by benefits that aren’t available when applying for private loans – so it may sometimes be worth it to fill in the additional paperwork that is required.