Private College Loans Are Often Needed In Addition To Government Loans

Most of the government student loan schemes need no credit check and will provide students with substantial financial assistance. However these programs are based on need and often carry additional criteria which can make it difficult to qualify. Even if a student does qualify, these loans will only cover a proportion of the whole education bill in the majority of cases. When students find themselves in that position then they could look to alternative college loans to meet the shortfall.

However, alternative college loans also have their difficulties. A credit check is almost universally required and this is not a problem as long as you have a good credit history. However 'good' is very much a relative term and if it is not good enough then you will find that you are paying more than the normal rates of interest.

On top of the quoted interest rate there are additional monetary implications to alternative loans. Fees will usually be added on to nominal loan amounts and a quite small loan of $3,000 might easily have 4% in fees applied prior to distribution. This means that $120 of the total loan is not seen by the student but nevertheless has to be paid back. As a very rough guide, 3% in fees is equal to an additional 1% on top of the quoted interest rate.

However private loans do carry some advantages.

The first and probably the most obvious one is that funds are available. Private lenders make their living on the interest and fees which they charge and so have an interest in making funds available to borrowers and will work very hard to ensure that each applicant qualifies for a loan. Government lenders on the other hand adhere to a rigid set of criteria and there is typically no appeal if your loan application is turned down.

Avoiding that frosty and frequently irrational bureaucracy is another benefit of private loans. Private lenders maintain customer service departments which exist specifically to deal with queries so that customers can get the answers which they are looking for. Government loan schemes frequently have help available too although the answers you get are more miss that hit in terms of quality.

Other practical features which make alternative loans particularly desirable include:

The fact that neither students nor parents have to fill out 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. Nonetheless, fees and interest rates can be higher or lower depending on the specific loan program.

The best private loans attract no fees and rates of interest which are roughly equal to the prime rate. This is the rate which banks charge one another or their biggest and most favored customers. If you can find an interest rate at prime then this is a very good deal and finding a rate at 1% below prime is a great deal.

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

In the end, the best way to discover whether an alternative loan is going to satisfy your requirements is to go out into the market and see just what is available.