Student Loans – Secured or Unsecured?
There are two kinds of debt – secured and unsecured. Knowing the difference between secured and unsecured student loans is essential in understanding how to manage your debt and prioritize your loans. This is the big question that all consumers in financial distress needs to know before taking any decision. For example, it is usually much easier to negotiate and settle unsecured debt with creditors.
Secured debt means the loan is based on something that can be repossessed by the bank, such as a mortgage or an auto loan. Both a house and a car make the loan more ‘secure’ because the bank can always take that ‘property’ back if you don’t make payments. Unsecured debt deals with most credit card debt and some personal loans, where money is given with no collateral.
The Federal Government offers student loans, commonly known as Stafford loans or Parent PLUS loans, depending on who is receiving the loan.
The Stafford loan, much like many other loans, only allows you to borrow up to a certain amount. The amounts differ between subsidized and un-subsidized, depending on what college year the student is in. These Federal loans are secured loans because they are government-issued with borrower payback guaranteed by the government. An upside: since these loans are guaranteed by the U.S. government, they are offered at a lower interest rate than the borrower would typically be able to obtain with a private loan. Keep in mind: there are strict eligibility requirements and borrowing limits on Stafford loans.
The Parent PLUS Loan is a Federal student loan available to the parents of dependent undergraduate students. The Parent PLUS Loan offers a fixed 6.31% interest rate for the 2016-2017 school year and flexible loan limits. To be eligible, a parent cannot have an adverse credit history. Parent PLUS Loans have a 4.272% fee.
Private student loans are done through any bank such as Wells Fargo, Chase, and Sallie Mae.
Frequently private loans supplement Federal loans or are used when the borrower is unable to get a Federal loan. The benefit of private loans is that they can be for any amount and can help pay for books, tuition, housing, food and other things you may need for college. Typically student loans are also known for their low interest rates, but be wary of private loans because the interest rates will vary from bank to bank. Private loans such as this are considered unsecured because a bank is unable to take your college education back from you.
Understanding the differences between private and Federal loans is important to create a financial plan. If you have unsecured student loan debt and have stopped making payments, it may be wise to visit www.settleitsoft.com and sign up for the free debt negotiation software which has been specifically designed to help settle unsecured debt with a variety of creditors, including student loan collectors.
Accessible via the Internet or Phone App, SettleiTsoft replaces the traditional methods of debt settlement with an interactive and transparent debt settlement process that stops harassing collection calls and gives consumers complete control of negotiations as to the terms of their debt settlements and creditor payment agreements.
In addition, the system has the capability of validating that the creditor is indeed authorized to collect the debt. Therefore, eliminating scammers who falsely claim the right to collect the consumer’s debt.