Many of the Federal student loan programs do not need a credit check and provide students with significant financial aid. However these programs are need based and often carry other criteria that can make it hard to qualify. Even if students do qualify, these loans only cover a proportion of the total cost of education in many cases. When students are caught in this situation then they can turn to private alternative college loans to meet the difference.
Private alternative educational loans too have their own problems. A credit check is almost universally required and this is no problem as long as you have a good credit history. But 'good' is very much a relative term and if it is not quite good enough then you will find that you are paying higher than the normal rates of interest.
Over and above the quoted interest rate there are further financial implications of private alternative loans. Fees will generally be added on to nominal loan amounts and a reasonably modest loan of $3,000 can easily have 4% in fees added prior to distribution. That means $120 of the total is not seen by the student but nonetheless had got to be repaid. As a rough guide, 3% in fees is equivalent to 1% on top of the stated interest rate.
However private alternative loans do have a few advantages.
The first and perhaps most obvious one is that funds are readily available. Private lenders make their living from the interest and fees that they charge and so have a vested interest in making money available to borrowers and they will work hard to ensure that each and every borrower qualifies for a loan. Government lenders on the other hand operate to a rigid set of criteria and there is frequently no appeal if your application is denied.
Avoiding that impersonal and all too frequently illogical bureaucracy is another benefit of alternative loans. Alternative lenders operate customer service departments that exist to deal with questions so that borrowers can get the answers that they need. Government loan programs frequently have help available too although the answers you get are hit or miss when it comes to quality.
Other considerations which make private alternative loans especially desirable include:
The fact that students and parents do not have to complete FAFSA (Free Application for Student Aid) forms and supply a mass of additional documentation. Alternative loan applications have a tendency to be far simpler and indeed the whole process is easier. Neverthless, interest rates and fees could be lower of higher depending on the specific program.
The most sought after alternative loans attract zero fees and rates of interest that are about equal to the prime rate. The 'prime rate' is the rate which banks charge one another or their largest and favorite customers. Getting an interest rate at prime is a good deal and finding a rate at 1% below prime is a great deal.
To get that type of loan it is normally necessary to have a very good credit history or have a co-signer who has a very good credit history.
Finally, the only way to find out whether an alternative loan is going to satisfy your requirements is to go out into the market and take a look at just what is on offer.
![[Valid RSS feed]](/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
