Did you apply for a scholarship to study in your dream institution but agonizingly got rejected? Got no other option but to take admission in any other institute? But wait! What if you do have an option?
Every year, hundreds and thousands of students apply for scholarships but obviously, not all of them land the opportunity. Ever wondered what the bright, but destitute students do in such a case? They apply for student loans from institutions. Yes, you heard it right. And if you are one of those students who has neither fallen into wealth nor selected for the scholarship, you can also apply for student loans to finance your higher education.
How can a student loan by defined?
A student loan, as stated previously, is
“A financial accommodation to worthy students granted against some security, enabling students to fund their education.”
An application in which a student requests a loan for funding his/her education is known as an application for a student’s loan.
Kinds of Students’ loans:-
The loans advanced to students can generally be divided into three categories. These are:
- Federal loans
- Private loans
- Refinanced loans.
#1 Federal loans:-
The loans provided by the government students for funding their education are called federal loans. These loans are also termed governmental loans.
Interest: interest, on federal loans is charged at a predetermined rate every year.
Benefits of acquiring federal loans:
Federal loans come with certain benefits. Some of these perks are as under:
- The majority of the federal loans do not require credibility or collateral against the amount receivable. This means that nearly every student who applies for these loans is eligible to receive them.
- These loans allow the students to repay them after getting a regular source of income, rather than at the end of degree completion.
- Another benefit is that these loans can be forgiven if the recipient starts working in the government sector.
#2 Private student loans:-
The second type of loan is the private loan. Advanced for the exact same purpose as the federal loans, a major difference is that these loans are forwarded by a bank or other financial institutions. Apart from depending on a good score of the recipient body, these loans require a signature from another person, qualified to repay the loan in case the recipient is not in the position to pay back the amount.
Interest: interest on these loans is also charged on a yearly basis.
Benefits of acquiring loans from private sources:-
Obtaining loans from private sources also comes with some perks. The major advantage is that loans advanced from private institutions are of several kinds, ranging in terms of interest. This means that you can apply for a loan that charges less interest than others.
Types of private loans:-
- Bar loans
- International loans
- State loans
- Credit union loans
- Medical school loans
- Student loans for bad credit.
#3 Refinanced student loans:-
Student loans are refinanced when a third party pays off a student’s private debt. In order to refinance a loan, a student must have a good credit band of 690 or higher.
Interest: In such a case, the third party is likely to receive some reduction in the amount of interest.
Benefits of refinancing loans:-
Refinanced loans provide students with a revised repayment schedule and lower interest rates.
Types of refinance loans:-
- Parents PLUS refinance loans
- Medical school refinances loans:
- During residency
- After residency.
Purpose of granting student loans to scholars:-
The purpose of granting student loans is, as mentioned earlier, is to cater to students’ financial needs.
However, it brings a benefit to the aiding party in the form of interest. The granting body, either the bank or the educational institute itself, demands interest from the students acquiring the loan, at a predetermined rate. Other than charging interest, they are also eligible to receive the full amount of the loan granted after the completion of the student’s degree, which, although being morally and ethically inappropriate, provides them a motivating factor, which encourages them to advance the loans.
Difference between a student’s loan and a scholarship:-
Although the purpose of both student loans and scholarships is the same, that is, to financially assist students in pursuing their education, there are a few points of differences between the two.
The major point of difference between a student’s loan and a scholarship is that a student’s loan is sanctioned against some sort of security, otherwise termed as collateral, on an interest basis. A scholarship, on the other hand, is bestowed as a fully-funded grant without any need of paying any interest.
Simply speaking, a student’s loan is repayable whilst a scholarship has no need of being repaid.
Another differentiating factor is the basis on which the financial aid (in the form of either loan or scholarship) is being provided. While a scholarship is provided on the basis of a student’s previous academic record and intellect, a loan is provided to those students who are credit-worthy. This means that whoever the bank or funding institution finds the most credible in terms of recovery of the amount of loan, gets the loan.
Format for Writing an Application Requesting Students’ Loan:-
While writing an application for a loan to finance one’s education, a particular format is to be followed. This not only helps to deliver the point to the reviewing authorities but also imparts a good impression regarding the sender.
The following are the essential components of an application requesting for student’s loan:
- Sender’s address:-
An application for a loan starts off with the sender’s details on the top left corner of the page. It contains his name, complete residential address along the name of the residing city.
The second component of the said application is the date on which the request has been penned down.
- Recipient’s address:-
Next comes the details of the recipient’s body. His designation, the name of the loan advancing institution, and the name of the city.
- Subject line:-
After the recipient’s address comes the subject line. It is an essential component of a loan application. It acts as a header for your application by containing the purpose of the application.
The words respected or honored, following the word Sir or Madam are included before starting the main body of the application.
- Main body:-
The main theme of the application is mentioned herein. The body contains the following information:
- A brief description of the sender.
- The motive of asking for a loan.
- Encouraging factors to be granted the loan.
- Estimated amount to be received as a loan.
- Words of gratitude:-
A phrase thanking the addressed party is also to be included.
A list of all the relevant documents attached should also be mentioned in the application in chronological order.
The application is ended with a signature from the sender and his sincere regards. Its position is the bottom right of the respective page.
The phone number and valid email addresses are also included at the end of the application.
Samples of Loan Application
Now that we have discussed the essentials of a loan application, it’s time to jump into some sample applications for your reference.
Application requesting a loan from a bank:-
Name of sender,
Address of sender,
Name of the residing city.
Dated: Feb 2, 2021.
Designation of the addressee,
Department of the addressee,
Name of the city.
Subject: Request for a student loan.
This is to inform you that I, (name of addresser) am the daughter of XYZ and XYZ (name of parents), the current and saving account holders of your reputed institute. My parents have been customers of your bank for the past 18 years. This is stated that I am inclined towards taking admission to XYZ University for pursuing my career in business.
In order to fund my higher education, I require a student loan from your prestigious institute. The estimated amount for my first semester is $25000.
It is also to be mentioned that my parents are wholeheartedly willing to co-sign for my loans. I hope that you will grant me the loan on account of my parents’ high credit standing.
I am looking forward to receiving the amount by the end of the summer season as I am slated to begin my semester from the winter season.
Enclosed with this letter are the necessary documents along with the student loan assistance form for your reference.
Looking forward to hearing from you at the contact details given at the end of this letter.
Thanking you in anticipation.
Enclosure: (list of documents)
(Name of sender,
(Signature of sender),
Phone number: xxxx-xxxxxxx,
Email address: [email protected]
Tips on composing an efficacious application for a student loan:-
Following are our top tips for writing a purposeful application requesting student loans:
- Show respect:-
The first thing to keep in mind s to show respect towards the recipient’s body through your style of writing.
- Avoid typos:-
Grammatical errors should be avoided while composing the application.
- List of enclosures:-
Including a list of documents attached with your application increases its worth and makes it stand out among the rest.
- Inclusion of subject line:-
The majority of the students disregard the importance of the subject line.
Banks and other financial institutions receive hundreds of loan applications on a daily basis. These applications are assorted. This means that they include applications for various kinds of loans, ranging from house building loan applications, consumer loan applications, student loan applications, and the like. The financing institutions, however, do not have the time to go through all of them. Therefore, the subject line helps them in this regard.
Even though you couldn’t make it to the list of scholarship applicants, you can still fulfill your dream of taking admission in a reputed institution and build your career by efficiently constructing a loan application.
This article provided a complete guide on how to compose a loan application along with guidelines on how to avoid the most common errors.
Let us know how useful you found this article in the comments section below. That’s all for this article!