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Private College Loans Are Typically Required In Addition To Government Funding

Most of the Federal student loan programs do not need a credit check to be undertaken and provide a student with significant financial help. These programs are however based on need and usually carry other criteria which may make it hard to qualify. Even when students do qualify, the loans only cover a proportion of the whole education bill in most instances. When students are caught in this situation then they could turn to private alternative education loans to make up the difference.

However, private alternative educational loans also have their problems. A credit check will almost always be required and this is not a problem as long as you have a good credit history. However 'good' is a relative term and if it is not quite good enough then you will find that you are paying higher than the standard interest rates.

As well as the stated rate of interest there are further monetary implications of private alternative loans. Fees will generally be added on to nominal loan amounts and a fairly modest loan of $3,000 can easily have fees of 4% added prior to distribution. This means that $120 of the total loan is never seen by the student but nevertheless must be repaid. As a rough guide, every 3% of fees is equivalent to an additional 1% added to the quoted interest rate.

Private alternative loans do carry certain advantages.

The first and perhaps the most obvious one is that funds are available. Private lenders make a profit on the interest and fees which they charge and so have an interest in making money available to borrowers and will try very hard to see that each applicant qualifies for a loan. Federal lenders by contrast are bound by an inflexible set of criteria and there is usually no appeal if your loan application is turned down.

Not having to deal with that frosty and all too often unreasonable bureaucracy is another advantage of alternative loans. Lenders have customer service departments which exist to deal with questions so that customers can get the answers which they need. Federal loan programs generally have help available as well but the answers you get are hit or miss when it comes to quality.

Other things that make private alternative loans particularly desirable include:

The fact that parents and students do not have to complete FAFSA (Free Application for Student Aid) forms and supply a mass of additional documentation. Alternative loan applications tend to be far simpler and the whole process is easier. However, interest rates and fees might be higher or lower depending on the particular loan program.

The most sought after alternative loans attract no fees and interest rates which are roughly equal to the prime rate. The 'prime rate' is the rate that banks charge each other or charge their largest and favorite customers. If you are able to find an interest rate at prime then this is a very good deal and getting a rate at 1% below prime is a truly great deal.

In order to get that type of loan it is usually necessary to have a very good credit history or to apply for the loan with a co-signer who has a great credit history.

Finally, the only way to discover whether an alternative loan will suit your purposes is to get out into the marketplace and take a look at just what is available.