By Wendy Clay on October 18, 2011
.jpg.aspx?width=75&height=75) Unsecured student loans are loans that do not require any upfront collateral or payments. These loans have few eligibility requirements and simple to follow regulations that make them an easy way to finance one’s education. Many Federal and private student loans from companies such as Bank of America, Citizen’s Bank, College Board, Sun Trust, Wachovia, Wells Fargo, and local credit unions fall under the category of unsecured loans. Unsecured student loans are great education financing options because:
- A cosigner is not required.
- Approval for such loans can be acquired in as few as two days.
- Collateral and upfront payments are not mandatory so you don’t run the risk of losing personal property if you are unable to pay the amount you owe on time.
- There are flexible repayment plans that can be extended for up to thirty years.
Unfortunately, there are downsides to unsecured student loans. First, they, like all other types of unsecured loans, generally have higher interests rates than secured loans, but by visiting financial institutions’ websites you can make comparisons to find the best available rate. Also unlike traditional unsecured loans, unsecured student loans are unique in that they are often secured by the federal government. This means that the federal government has ensured your financial institution that you will pay back your student loan.
To stay true to this promise, the federal government can withhold tax refunds, order employers to deny wages, and make the statute of limitations (the statute that prevents creditors from hounding you to repay your defaulted loans after a certain period of time has elapsed) inapplicable to student loans. Unsecured student loans also vary from other forms of unsecured debt in that they may not be expunged from your financial record if you file for bankruptcy.
Regardless of the few negative aspects discussed above, unsecured student loans are still a great option for financing education. When deciding whether or not to pursue a higher education, think about the benefits such an education offers (more job opportunities in fields with higher wages) and decide whether or not they trump the negatives from above. If so, research your options to find the best interest rates and repayment plans.
Sources:
“Department of Education Debt Collection.” stopcollector.com. Lemberg & Associates, n.d. Web. 20 Sept. 2011
“Student Loan Debt vs. Other Debts.” stopcollector.com. Lemberg & Associates, n.d. Web. 20 Sept. 2011
“Unsecured Student Loans.” simpletuition.com. SimpleTuition, n.d. Web. 20 Sept. 2011
“What is Unsecured Debt and Secured Debt?” superpages.com. n.p., n.d. Web. 20 Sept. 2011
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