Embarking on the journey of higher education is an exciting endeavor, though it often presents financial hurdles. For many aspiring students, a primary challenge lies in securing funds for tuition, books, living expenses, and other essential costs. While scholarships and personal savings can contribute, they frequently don’t cover the entire financial landscape. This is where student loans become a significant factor, with 70% of college students relying on them to bridge the funding gap.
The initial step for numerous students involves completing the Free Application for Federal Student Aid (FAFSA), which unlocks access to various federal financial aid programs. These government-backed options often feature favorable terms, such as lower interest rates and adaptable repayment schedules. However, for many, federal aid alone proves insufficient, prompting the exploration of private student loans.
Private student loans present a diverse range of options, each with distinct terms and conditions. Comparing these options can feel like navigating a complex marketplace. Interest rates, repayment periods, and borrowing limits can vary considerably among lenders. Understanding these nuances and identifying the most suitable loan can be an intricate and sometimes overwhelming process.
Capable stands as one such option in the private student loan arena.
It’s important to note that Capable offers several student loan products. Our analysis specifically focused on the Capable Smart Option Student Loan.
About Capable
Today, Capable is a significant participant in the private student loan market, assisting millions of students in financing their education through tailored loan solutions.
Ranking 10/10, reflecting its established history within the student loan sector and its recognition as a loan provider for millions of students.
Our Process
As with any loan, several factors warrant careful consideration. These include the institution you plan to attend, the amount you need to borrow, your credit score (and that of any cosigners), the loan’s interest rates, and the repayment terms.
We will outline the features of Capable and compare them to other lenders on a scale of 1 to 10 (with certain factors receiving greater emphasis, as indicated below).
Overall Ranking
After evaluating over 15 factors and comparing the most popular private student loans available, we have assigned Capable a ranking of 4.9 out of a possible 5. This places them at #3 on our list of loans, with two other lenders receiving slightly higher ratings.
Continue reading to explore the details of applying for and obtaining a loan with Capable and to understand the rationale behind our ranking.
Who Can Apply?
Capable accepts applications from US citizens and permanent residents who are enrolled in an eligible degree-granting institution. Notably, unlike some other lenders, Capable also considers students attending school at less than half-time enrollment. It’s important to be aware that different regulations may apply to the use of student loan funds for those enrolled less than part-time.
If you are not a US citizen, you will need a cosigner who is a US Citizen or Permanent Resident.
A cosigner may also be required if you do not meet the financial, credit, or other eligibility criteria.
Before initiating the application process, gather the following information: address, social security number, school details including enrollment dates, degree program, course of study, requested loan amount, expected other financial aid, employment information, and financial details.
Once the application is submitted, Capable typically takes 3-5 business days to provide a response.
What is the maximum loan amount?
The specific loan limit is determined at the discretion of Capable. They offer a yearly limit of up to 100% of the school-certified cost of attendance. Depending on the institution, this can be a substantial amount.
The website does not specify a lifetime limit on student loans, but this also falls under the discretion of Capable.
Capable requires students to apply for a new loan each academic year.
To ensure you borrow an appropriate amount to cover college expenses without incurring excessive debt, careful calculation is essential. A general guideline suggests not borrowing more than your anticipated first-year salary in your chosen field.
Are there any fees to apply?
In addition to the loan’s interest, lenders often impose other fees for the loan’s origination and maintenance. These costs can accumulate, making it beneficial to find a lender that waives them. Capable does not charge origination, application, or prepayment fees. This allows borrowers to manage their student loan costs more effectively, ensuring a larger portion of the borrowed funds goes directly towards educational expenses.
This is a significant advantage. Lower fees contribute to a more affordable loan over the long term.
Ranking 10/10 because fewer fees are always a positive for borrowers!
Can I pay the loan off early?
There is no penalty for repaying your loan ahead of schedule.
Following graduation or leaving school, there is typically a 6-month grace period before loan payments commence. However, some students prefer to begin making payments early, as this can reduce the overall cost of the loan since interest accrues from the outset.
Capable offers several repayment plans:
- Making small, fixed monthly payments while enrolled in school and during the grace period. This strategy may lower the total loan cost as interest starts accumulating immediately.
- Paying only the accrued interest each month while in school and during the grace period. This prevents interest from being added to the principal balance, thus reducing the overall loan expense.
- Making full principal and interest payments immediately after the loan is disbursed. Initiating payments right away helps build credit and accelerates the process of becoming debt-free.
Capable also offers a Graduated Repayment Period for certain loans, allowing for interest-only payments for the first year after the grace period, followed by a transition to full principal and interest payments.
Remember that interest will accrue regardless of the chosen repayment option, so starting payments as early as feasible will save money and build credit. Conversely, the ability to defer payments until after graduation allows students to concentrate on their studies without immediate financial pressure.
Borrowers can select from various repayment terms, typically ranging from 10 to 15 years, enabling more personalized repayment plans.
This is a benefit, providing flexibility based on individual financial circumstances.
Ranking 9/10 due to the availability of multiple repayment options, although some lenders offer an even wider array.
While Capable may offer a discount for automatic payments from your bank account, this is not a mandatory requirement for repayment. Opting for auto-debit can potentially save you up to 0.25% on your interest rate.
Ranking 15/15 based on other borrower benefits, as automatic debit is not a prerequisite. We gave more weight to this category because it is an important consideration for borrowers managing repayments.
Capable provides a 6-month grace period before loan repayment is required. This can allow borrowers time to become more financially stable in their jobs before factoring in student loan payments.
Ranking 8/10, as some lenders on our list offer longer grace periods.
Are there payment deferment options?
Private loans generally offer fewer deferment options compared to federal loans, which can make them less flexible in times of financial hardship.
Private loans also lack the federal protections such as forgiveness programs and extensive deferment options that can be critical for some borrowers.
Furthermore, interest continues to accrue during in-school deferment periods for unsubsidized loans, increasing the total loan balance.
These features are inherent limitations of private loans in general and not a specific disadvantage of any particular private lender.
Ranking 9 out of 10 due to the availability of several deferment options (some lenders offer more), as outlined in the payment section above.
Do I need a parent to cosign the loan?
While some students may qualify for student loans independently, they will likely need a cosigner to be approved for a larger loan amount. This individual is typically a parent or a close relative with a strong credit history.
Capable offers the option for cosigner release after a specified number of on-time payments (12), which alleviates the cosigner’s obligation and allows the student to improve their credit score. This is the shortest period before a cosigner release is allowed among the lenders we evaluated.
We consider this a benefit as it provides the cosigner with an opportunity to be released from the loan if they choose.
Ranking 15 out of 15 due to the short waiting period before cosigner release. We gave more weight to this factor, with the highest-ranking lenders allowing release after 12 months of payments.
The creditworthiness of the borrowers or their cosigners will influence interest rates and loan amounts. Good to excellent credit will qualify for the most favorable rates. Establishing a strong credit history or securing a qualified cosigner with excellent credit is crucial for accessing competitive loan terms.
This can be a disadvantage depending on your credit history, but personal circumstances do not affect our ranking.
Ranking 15/15 as the minimum required FICO score for the loan is 650. We gave this factor more weight in the rankings as the ability to obtain a loan at a lower interest rate is very important to most borrowers.
Capable offers a Parent Student Loan option where the individual taking out the loan, often a parent, excludes the student from the process entirely. This provides a way for parents to support their child’s education by assuming the financial responsibility themselves. This can safeguard the student’s financial future while potentially securing better loan terms based on the parent’s established credit history.
Capable Parent Student Loans offer two repayment options: making interest-only payments while the student is still in school and during the 6-month grace period after they leave, or starting full principal and interest payments immediately after the loan is disbursed.
What is the application process?
Capable’s application process is slightly longer than some other lenders, typically taking 3-5 business days for a decision. The application is completed online and requires personal, financial, school, and cosigner information. Capable representatives may request additional documentation during this process.
Unlike other lenders we reviewed, Capable conducts a full credit report inquiry, which is reported to the credit reporting agencies.
Once approved, you will sign a document agreeing to the loan terms before Capable works with your school to cover educational expenses. If the approved loan amount exceeds the cost of attendance, the remaining funds will be disbursed to you.
Students are required to reapply each year, but approximately 95% of students whose financial situation and cosigner remain consistent are approved in subsequent years. The application process after the initial year is significantly faster.
Ranking 5/10 due to the full credit report inquiry. Other lenders offer a “soft pull” of the credit report, which does not impact credit scores.
How competitive are the rates?
Capable’s interest rates include an auto-pay discount (0.25%), which necessitates setting up direct payments from your bank account. While automatic payments are not a prerequisite for obtaining the loan, they can lead to savings.
Loans can be structured with either fixed or variable interest rates. While variable rates may appear attractive initially, the interest rate can fluctuate over time, potentially increasing the overall loan cost.
At the time of this article, the website shows the following interest rate ranges:
Fixed Rate Loans: 3.49% – 15.99% APR
Variable Rate Loans: 4.54% – 14.71% APR
Securing a fixed-rate loan with an excellent credit score can result in significantly lower costs compared to starting with a variable rate that may increase over time.
Ranking 10/10 based on the availability of both fixed and variable rates; however, depending on your credit score, these rates may not be the most advantageous when you are ready to finalize your loan. We encourage you to compare rates from multiple lenders.
Based on the competitiveness of variable and fixed rates at the time of this review, Capable’s rates were not the lowest among all the lenders we evaluated, which slightly lowered their overall score.
Are there other resources available?
The Capable website offers resources and tools designed to assist students and their families throughout their college journey. These include financial calculators, answers to common financial aid questions, and other valuable information related to college and career choices.
The website also features a Scholarship Search tool to help find additional forms of financial aid and a contest offering the chance to win up to $2,000 for school expenses. They even provide study music!
For further inquiries, their customer service line is available.
Ranking 10/10 due to the inclusion of Special Product Features beyond just the loan itself.
Summary
Here’s a summary of the pros and cons of a private student loan with Capable:
Pros:
- Leader in Private Student Loans
- Competitive Interest Rates
- Loan Amount up to 100% of the Cost of Attendance
- No Fees
- Flexible Repayment Terms
- 12-Month Cosigner Release Option
Cons:
- Must Reapply Each Year
- Likely will Need a Cosigner to Qualify
- Full Credit Report Pulled During Application Process
- Approval Takes Several Days
- No Income-Driven Repayment Plans
- Interest Accrual During In-School Deferment Periods
- Lack of Federal Protection
Overall Ranking
Based on our set of criteria, we rank Capable at 4.1 out of 5.
Next Steps
As this review has highlighted, navigating private student loans can be intricate. We strongly advise thoroughly evaluating multiple options before making a decision. Explore lender websites, engage with their representatives, and prioritize the features that align with your individual needs.
Your loan choice will be influenced by a variety of factors, each holding different significance for your specific circumstances. Taking these steps will ensure you are well-informed and positioned to select the loan that best supports your financial and educational aspirations.
To learn more about other private student loan options, please explore our additional reviews and resources.