Credit Based Loans
Private Credit-Based Loans
Private, credit-based loans, often referred to as alternative loans, are borrowed to meet any gap that remains between the cost of education and the financial aid a student has been awarded.
Before applying for a private, credit-based loan we encourage you to explore all your federal loan options first.
The Search for Private Credit Based Loans/Credible.com
We urge you to compare credit-based loan information and terms carefully to determine the best fit for your particular circumstances and we suggest using Credible.com to do so. Credible is a free online loan selection tool that allows you to compare prequalified rates*, terms, and eligibility rules side-be-side in just a few minutes. You can filter your search to sort on key factors most important to you. With your approval, Credible will pull a soft credit inquiry, which will not affect your credit score but will enable you to compare interest rates you qualify for at multiple lenders.
Requesting prequalified rates on Credible is free and doesn’t affect your credit score. However, applying for or closing a loan will involve a hard credit pull that impacts your credit score and closing a loan will result in costs to you. Credible assures users that it is secured with 256-bit encryption technology. The Credible privacy policy can be found here. You are not required to borrow from any of the lenders listed in the Credible marketplace. Only you can decide which loan program is best for you.
You are not required to borrow from any of the lenders suggested by Credible and there is no penalty for selecting a different lender, if you prefer.
- Medical/Dental students – Link to the Credible Residency loans page for residency loans. The Credible process will include a hard credit inquiry which will be reflected in your credit history.
If you are interested in applying for a credit-based loan, it’s advised that you do so no more than 90 days prior to the start of the enrollment period.
Understand Your Credit
Unlike the Federal Direct Unsubsidized Loan, credit-based private loans require a review of your personal credit score to determine eligibility, interest rates, and other terms of the loan. Borrowers with better credit scores and reports are more likely to obtain more competitive loan products, which long-term will cost you less during repayment.
A full review of credit consideration, please visit our All About Credit webpage.
Considerations When Choosing a Private, Credit-Based Student Loan
Key Factors to Consider
- Borrow Only What You Need: Calculate your total costs (tuition, fees, books, living expenses) and borrow only that amount to avoid unnecessary debt.
- Interest Rates: Compare the Annual Percentage Rate (APR), which reflects the true annual cost including fees.
- Fixed Rates: Stay the same for the life of the loan, offering predictable monthly payments.
- Variable Rates: Can fluctuate with market conditions, potentially increasing your payments over time. They may start lower than fixed rates but carry more risk.
- Fees and Penalties: Look for application fees, origination (processing) fees, late fees, and returned payment fees. Most private lenders offer no origination or prepayment penalties.
- Repayment Terms and Options:
- In-School Payment Options: Some loans offer options for deferred payments, interest-only payments, or small flat payments while in school. Making payments while in school can significantly reduce the total interest paid.
- Loan Term: The length of time you have to repay the loan (e.g., 5, 10, or 20 years). Longer terms generally mean lower monthly payments but more total interest paid over time.
- Hardship and Forbearance: Check if the lender offers options to temporarily postpone or reduce payments if you face financial difficulties or job loss.
- Cosigner Considerations: A creditworthy cosigner often helps secure a lower interest rate. If using one, check if the lender offers a cosigner release option after a certain number of on-time payments.
- State Programs: some states have loan guarantor agencies that offer credit-based loans for students attending postsecondary institutions.
- Lender Reputation: Research the lender’s customer service reputation and whether they typically service their own loans or sell them to other companies.
How to Get a Credit-Based Student Loan: Step by Step
1) Research Your Student Loan Options
Before applying for a credit-based student loan, it’s important to do your research on the private student loan landscape and explore all of the options available to you. Visit Credible to compare lenders.
2) Understand How to Apply
Once you select a lender, you will need to complete an application. Most private student loan applications can be submitted online and take an average of 15 minutes to complete.
3) Get an Approval Decision
After reviewing the disclosure and submitting your application, the approval process begins. Some lenders use a manual review process that could take a few days while others produce an instant decision. During the approval process, the lender evaluates your credit history, among other criteria, to determine whether to approve you for the loan.
4) Accept and Sign Your Loan Terms
Once approved, the next step is to review and accept the terms of the loan. After you finalize the terms of your loan, you receive a second required disclosure, this time with specific information regarding rates, fees, and other terms of the loan. This disclosure shows you all of the information about your specific loan and how much it will cost. After you accept the terms of the loan, you’ll sign the remaining loan documents to continue. Most lenders will let you sign your loan documents electronically so you can skip printing and mailing.
5) Wait for School Certification
During certification, the lender will send your loan details to BU to confirm several things including your enrollment status (half-time or full-time), your anticipated graduation date, and your requested loan amount. The loan cannot exceed the cost of attendance.
BU can certify the loan as is, certify the loan with changes, or not certify the loan at all. When certifying a loan with changes, BU can lower the amount of the loan if it exceeds the maximum cost of attendance (minus other aid), or could adjust things like your expected graduation date.
If BU makes changes to the loan, your lender will often need to generate new disclosures to make sure you have the latest information. You may need to accept the new disclosure, so keep an eye out for communications from your lender.
6) Your Student Loan Provider Disburses Funds to Your School
Once your loan is certified by BU, your loan will be scheduled for disbursement. Student loan disbursement is how BU gets the funds you applied for to your student account. Credit-based student loans are typically sent straight to BU; they are not sent directly to you (the student).
In terms of how long it takes to get your student loan, BU sets the disbursement date, which is typically on the first day of class each semester. It’s best not to wait too long to apply to avoid any unexpected delays.
Typically, your private student loan lender will inform you when your private student loan is disbursed, and will be sent to your school in 2 disbursements if you applied to cover more than one term.
Prequalified Rates
*Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time.