Getting student loans from the big banks
When talking about student loans, bigger might be better for some, but for others, things get tricky.
In order to help decide whether you should apply for student loans from banks that are bigger, here are some pros and cons that would be of help in your decision.
PROS OF GETTING STUDENT LOANS
The differences between federal and private loans might already be clear. But what about the distinctions between big-bank lenders and smaller ones that offer products alike?
Here are ways in which getting a student loan from a big bank is outrightly better.
YOU GET TO KEEP YOUR FINANCES IN ONE PLACE
If you bank with a large institution already, you might have a friendly face to go to with questions. If you’re happy with the service you receive on your checking and savings accounts, it could make sense to take out a student loan with a company you know and trust.
There could also be financial rewards for holding multiple accounts at the same bank. You can typically open these bank accounts at any time before finalizing a loan to receive the lower rate.
YOUR SERVICER MOST LIKELY DOESN’T CHANGE
If we learned anything from the Great Recession, it’s that the popular saying… “too big to fail” holds true. Large banks that received bailouts of taxpayer money included those that offer student loans.
That’s not to say larger banks are immune from going under, but they almost always have a better chance of staying in business. And for borrowers, this means that service that won’t be interrupted.
Smaller lenders with shorter track records can’t give people the same comfort. Like in a case where they are being sought to be bought by another company. Its most times unclear what would happen to its customers if it were to sell.
If you.re not looking to lose a servicer that you like dealing with, let that be an addition in the column for big banks that offer student loans.
Also, realize that it’s impossible to have complete control over who manages your student loan debt. Even your federal loan servicer can change at a moment’s notice.
YOUR APPLICATION GETS ACCEPTED MOST OFTEN THAN NOT
As a result of the fact that big banks have been around for longer and tend to attract more customers, it should not be a surprise that their standards can be lower at times. To them, you might not need as high of a credit score or annual income to be approved for a loan. Some of them for example, don’t require applicants to show positive income even when they don’t have a cosigner. Obviously, this is of great advantage when considering taking loans from big banks.
CONS OF GETTING STUDENT LOANS FROM BIG BANKS
If there was no downside to financing your education through a large financial institution, smaller and newer companies would be of no purpose and value and would not be in competition.
Here are ways that taking out loans from a big bank could turn sour.
IT TENDS TO TAKE LONGER
As is the case in many of these categories, comparing lenders is a numbers game. And although it varies lender to lender, big or small, big banks typically take longer to apply to. There’s more digital red tape to cut past. In some banks you can apply for a student loan in under 15mins unlike others. Some say you only need 3 minutes.
With that said, the arrival of fintech companies and their increased competition has forced older banks to modernize their service.
If you’re considering borrowing from a big bank, give their technology a spin. And if you’re looking at other lenders who proclaim their tech savviness, confirm their credentials by first looking under the hood.
CUSTOMER SERVICE TENDS TO BE SLOWER AND FRUSTRATING
I opened up a “big bank’s” chat function and asked what the benefits are of borrowing from a larger than average lender. The customer service rep rattled off some perks, such as cosigner release, that other lenders offer. While the answer was unsatisfying, the service was not. This function is fairly unique in this regard. Other banks that offer student loans, have no chat function at all, they ask you to dial into an automated phone system.
It’s fair to be skeptical and assume that big banks might generally be slower or less helpful in servicing a loan. After all, most offer so many other products (from banking to investing) that they can’t possibly be as reactive as a smaller lender that has just one type of product to manage.
Regardless what lender you decide to go ahead with, make sure you properly look into it by consulting existing customers reviews.