Private Education Loans To Supplement Federal Funding
A lot of the Federal student loan schemes need no credit check to be carried out and provide a student with significant financial aid. These programs are however based upon need and frequently carry other criteria which might make it hard to qualify. Even if students do qualify, these loans only cover part of the total education bill in many cases. If students find themselves in that position then they may look to private alternative college loans to make up the shortfall.
However, alternative educational loans also have their pros and cons. A credit check will almost always be required and this is no problem as long as you have a good credit history. The problem is that ‘good’ is very much a relative term and if it is not good enough then you will find yourself paying more than the normal rates of interest.
In addition to the stated rate of interest there are further monetary implications of alternative loans. Fees will normally be added on to nominal loan amounts and a relatively modest loan of $3,000 might easily have 4% in fees added before distribution. That means that $120 of the total loan is not seen by the student but nonetheless must be paid back. As a very rough guide, 3% in fees is equivalent to an additional 1% added to the stated interest rate.
But private loans do have certain advantages.
The first and perhaps most obvious one is that money is available. Private lenders make their money on the interest and fees that they charge and so have an interest in making funds available to borrowers and they will work very hard to ensure that every borrower qualifies for a loan. Federal lenders on the other hand are bound by an inflexible set of criteria and there is usually no real appeal if your loan application is turned down.
Not having to deal with that cold and all too frequently irrational bureaucracy is another benefit of alternative loans. Private lenders maintain customer service departments which are there specifically to deal with questions so that customers can get the answers which they need. Federal loan schemes generally have help available too but the answers one gets are hit or miss in terms of quality.
Other practical considerations which make alternative loans especially desirable include:
The fact that parents and students do not have to fill out FAFSA (Free Application for Student Aid) forms and provide a lot of supplemental documentation. Alternative loan applications are simpler and the whole process is easier. However, fees and interest rates may be higher or lower according to the particular program.
The best alternative loans have zero fees and rates of interest which are about equal to the prime rate. This is the rate that banks charge one another or their biggest and most favored customers. Getting a rate at prime is a very good deal and getting a rate at 1% below prime is a great deal.
In order to get this sort of loan it is generally necessary for you to have a very good credit history or to apply for the loan with a co-signer who has an excellent credit history.
When all is said and done, the best way to discover whether an alternative loan is going to suit your purposes is to go out into the market and see exactly what is available.
