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.
Private alternative educational loans too have their own problems. A credit check will nearly always be required and this is not a problem as long as you have a good credit history. The problem is that 'good' is a relative term and if your credit history is not quite good enough then you may find that you are paying higher than the usual 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 funds are available. Private lenders make a profit from the interest and fees which they charge and so have an interest in making money available to borrowers and will work very hard to see that each and every borrower qualifies for a loan. On the other hand Federal lenders adhere to an inflexible set of criteria and there is generally no real appeal if your application is turned down.
Not having to deal with that unfriendly and frequently irrational bureaucracy is another benefit of private loans. Alternative lenders have customer service departments that are there to deal with queries so that customers can get the answers that they need. Federal loan schemes typically have help available too but the answers one gets are more miss that hit when it comes to quality.
Other practical features that make alternative loans particularly 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 private loans have zero fees and rates of interest that are roughly equal to the prime rate. The 'prime rate' is the rate that banks charge one another or their biggest and special customers. Getting an interest rate at prime is a very good deal and getting a rate at 1% below prime is a truly great deal.
To get that type of loan it is usually necessary to have a great credit history or to apply for the loan with a co-signer to the loan who has a very good credit history.
In the end, the only way to discover whether or not an alternative loan will satisfy your requirements is to go out into the market and take a look at precisely what is available.
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Visit TheStudentLoansCenter.com for information about college financial aid including locating bad credit alternative student loans
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