Bar Exam and Bar Prep Loans
Preparing for the bar exam is like taking on a full-time job. Juggling work and study can be overwhelming, especially if you’re supporting yourself or your family. That’s where a bar loan comes in. Designed specifically for graduating law students, this loan helps cover the costs associated with the bar exam.
What is a Bar Loan?
A bar loan is a loan designed to help potential lawyers cover the bar exam cost as well as exam prep and living expenses associated with preparing for and taking the bar.
Bar loans are typically only available to students who are in their last year of study, or will be sitting for the bar within 12 months of graduation from an ABA accredited law school. Many lenders require that you are a U.S. citizen or permanent resident, or that you are applying with a creditworthy cosigner who is a U.S. citizen or permanent resident.
There are no universal one-size-fits-all bar loans. Each lender has its own set of criteria, so you should always read the fine print.
What Expenses can a Bar Loan be Used For?
Bar loans can be used for a variety of expenses related to taking the bar. These include:
- Bar exam prep courses
- Living expenses
- The cost of taking the bar exam
How Much Can I Borrow?
The amount you are eligible to borrow will depend on your credit history and your chosen lender, for example, the Sallie Mae Bar Study Loan allows you to borrow as little as $1,000 or as much as $15,000. Aggregate loan limits apply. It’s important to shop around to find the best deal for you, and one that meets your specific needs.
How to Compare Bar Loans
You would compare a bar loan in the same fashion you would any other loan. Here are some of the features you will want to compare when shopping around.
Interest Rate
Similar to other private loans, the interest rate on a bar loan may be fixed or variable. Note that your creditworthiness will play a large role in the rate you receive (i.e., the rates that are advertised may not be the rates you qualify for). You may qualify for a better rate if you apply with a creditworthy cosigner.
Loan Minimums and Maximums
Choose a lender that offers the loan minimum or maximum that works best for your situation. We advise only borrowing what you need to in order to reduce your debt.
Auto Debit
Many lenders offer interest rate discounts for borrowers who enroll in automatic payments. These discounts are typically 0.25%. Consider choosing a lender that offers this benefit to save money over the life of your loan.
Repayment Terms
When it comes to your loan repayment term, it will be determined in collaboration with the lender. Keep in mind that different lenders have varying repayment terms, so it's crucial to compare this aspect while seeking a bar loan. Repayment terms can range from 1 to 20 years. Remember, the sooner you repay, the more cost-effective it will be in the long run.
Tip: Pay attention to your repayment start dates. The repayment dates on your federal student loans, private student loans, and bar exam loan may be staggered.
No Prepayment Penalties
Most bar loans will not penalize you for repaying your loan early, however, it’s important once again to read the fine print to see how your payments are applied to you loan, and how a loan payoff payment would be applied.
Cosigner Release
If you required a cosigner to take out your bar exam loan, you may be interested in going with a lender that offers cosigner release. This allows you to remove your cosigner from the loan after you’ve made a series of on-time payments in full (typically 24 to 48 months). A cosigner release must be requested by the borrower, not the cosigner.
Loan Fees
It’s important to compare any fees you may be charged for your loan. Does the lender require and application or origination fee? Do they charge a prepayment penalty if you pay your loan off early? The fees you may be charged impact the overall cost of the loan.
Note that the origination fee is deducted from the total amount you’re borrowing prior to disbursement, so it’s important to factor that cost in. The good news is many lenders do not charge origination fees for bar exam loans, and application and prepayment penalties are also uncommon.
Lender Specific Benefits
In addition to the typical benefits most lenders offer, individual lenders may have benefits unique to their loan programs. These may include periods of deferment, interest only payment options, etc.
How to get a Bar Exam Loan
First, compare lenders to find the right option for you. Most lenders offer an online application, allowing you to apply and get an answer quickly. Once you have been approved, your funds will be distributed to directly to you either via check or electronic deposit.
Bar Loan FAQs
When Should I Apply for a Bar Loan?
There are 2 qualifying timeframes when you can apply for a bar loan. You can apply during your final year of law school while you are enrolled at least half time pursuing a Juris Doctor (JD) or Master of Laws (LLM) degree. The other timeframe is within 12 months of degree completion. Most law schools recommend that you apply during your final spring semester.
What Will My Interest Rate Be?
You interest rate will be determined by your credit history and that of your cosigner if you have one. Even if you do not require a cosigner, you may qualify for a lower interest rate if you apply with one. Interest rates may be fixed or variable.
Are There Loan Fees?
Loan fees vary by lender. You may encounter application or origination fees depending on the lender you choose. There are many lenders who do not charge application or origination fees.
How Will My Bar Exam Loan Funds Be Disbursed?
Unlike a student loan, where the money is sent to the school, your bar exam loan funds will be disbursed directly to you either via check or electronic deposit.
Can I Get a Bar Exam Loan With Bad Credit?
If you have bad credit you will need a creditworthy cosigner to qualify for a bar loan. Here’s what to look for in a creditworthy cosigner:
- Stable employment
- Strong credit history
- U.S. citizen or permanent resident
- No recent bankruptcies
>>>More: How to Find Good Cosigner
Is There a Federal Bar Option?
There are no federal “bar loans,” however, if you are still enrolled in coursework at least half-time, you many apply any unused federal Unsubsidized Loan funds to cover the cost of sitting for the bar. Note living expenses and the cost of bar exam prep courses are typically not covered by federal loans.
What If I am Denied for a Bar Loan?
If you applied on your own and were denied, you can reapply with a creditworthy cosigner. If this is not an option, you may be in a position where you will have to work while preparing for the bar. Another option is a secured personal loan. These loans typically have lower rates than unsecured loans, but require an asset as collateral, such as a car or savings account.