The Disadvantages of Private Loans for Online MBA Students

When it comes to education financing in the United States, students often opt for federally-backed funding. This is because it is usually offered at a lower interest rate and has more flexible repayment plans to suit a student’s circumstances. However, if a student does not qualify for funding, then a private loan could be seen as a lucrative option for financing, but it does not come without consequences. Students should consider these three points before settling on private funding as a source of cash for their online education:

Disadvantage #1: Credit Checks in an Online MBA Private Loan

Unlike federally backed sources of funding, private loans require a credit check in order to assess the student’s credit history. This can result in an extremely high interest rate or may fully turn down the student for a private loan. If a student is given a high interest rate loan as an option, then it is likely that they will require a co-signer to ensure that the lender will be able to recover debts if a student defaults. This will likely be the student’s parents in many instances.

Disadvantage #2: Variable Interest Rates on an Online MBA Private Loan

Besides being higher than federally funded options, students may also find that private loans come with variable interest rates over fixed rates. This means that the lender can adjust repayment schedules to suit his or her own benefit rather than keeping a loan at a fixed repayment rate. Sudden increases in loan repayment terms and amounts can throw students who are on fixed income into turmoil. This is because variable interest rates often exceed a fixed income, so may require the student to use planned overdraft facilities on their bank accounts or resort to paying a loan debt using a credit card.

Disadvantage #3: Multiple Applications for an Online MBA Private Loan

Loans typically only cover one lump sum of cash. This means that students may have to apply for private loans with each academic year in order to assure themselves of a stable cash flow throughout their studying years. It also means that interest rates can quickly spiral out of control with the fluctuation of the rate of inflation. It also means that students will be met with unnecessary aggravation through excessive paperwork!

It is with these three disadvantages that students should forget the idea of private loans for their online MBA program. Federally funded options offer greater flexibility and lower interest rates when compared to private loans.

Comments

One Response to “The Disadvantages of Private Loans for Online MBA Students”
  1. Well I don’t like any loans when people play with your finances like that.

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