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Alternative College Loans Are Often Required In Addition To Government Funding Most of the Federal schemes do not need a credit check and provide students with substantial financial aid. These programs are however need based and generally carry additional criteria which can make it difficult to qualify. Even if students do qualify, these loans only cover part of the whole cost of education in the majority of instances. When students find themselves in that position then they may turn to alternative college loans to meet the difference.
However, alternative student loans also have their pros and cons. A credit check will nearly always be required and this is not a 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 may find yourself paying higher than the standard interest rates.
Beyond the stated rate of interest there are additional financial implications of alternative loans. Fees are often tacked on to nominal loan amounts and a quite modest loan of $3,000 can easily have fees of 4% applied prior to distribution. That means $120 of the total will not be seen by the student but nonetheless must be repaid. As a rough guide, every 3% of fees is equivalent to 1% added to the normal interest rate.
However private alternative loans do carry a couple of advantages.
The first and maybe most obvious one is that money is available. Private lenders make their living from the interest and fees which they charge and so have a vested interest in making funds available to borrowers and will work hard to ensure that every applicant qualifies for a loan. By contrast Federal lenders have an inflexible set of criteria and there is normally no appeal if your application is denied.
Avoiding that unfriendly and often unreasonable
bureaucracy is another advantage of alternative loans. Private lenders operate customer service departments which are there to deal with queries so that customers can get the answers which they need. Government loan schemes generally have help available as well but the answers you get are hit or miss when it comes to quality.
Other things that make alternative loans especially desirable include:
The fact that students and parents do not have to complete FAFSA (Free Application for Student Aid) forms and provide a mountain of supplemental documentation. Alternative loan applications have a tendency to be a lot simpler and indeed the entire process is easier. Neverthless, fees and interest rates can be higher or lower depending on the individual program.
The most desirable alternative loans attract no fees and interest rates which are approximately equal to the prime rate. The 'prime rate' is the rate that banks charge one another or their largest and favorite customers. If you can find an interest rate at prime then this is a good deal and getting a rate at 1% below prime is a truly great deal.
To get that sort of loan it is generally necessary for you to have a great credit history or to apply for the loan with a co-signer to the loan who has an excellent credit history.
At the end of the day, the only way to discover whether an alternative loan will satisfy your requirements is to get out into the market and take a look at just what is available.
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