Most of the government student loan programs do not require a credit check to be carried out and provide students with significant financial aid. These programs are however need based and usually carry additional criteria that may make it hard to qualify. Even when a student does qualify, the loans only cover a portion of the whole cost of education in many cases. When students are caught in this position then they could look to alternative student 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.
Beyond the stated interest rate there are other monetary implications of alternative loans. Fees are generally added on to nominal loan amounts and a reasonably small loan of $3,000 can easily have fees of 4% applied prior to distribution. This means that $120 of the total loan will not be seen by the borrower but nevertheless has to be paid back. As a guide, every 3% of fees is equal to 1% added to the normal interest rate.
However private alternative loans do have a couple of advantages.
The first and perhaps most obvious advantage is that money is readily available. Private lenders make their money from the interest and fees that they charge and so have an interest in making funds available to borrowers and will try very hard to see that every borrower qualifies for a loan. Government lenders by contrast are bound by a rigid set of criteria and there is frequently 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 features that make alternative loans particularly desirable include:
The fact that neither parents nor students have to complete FAFSA (Free Application for Student Aid) forms and supply a mountain of additional documentation. Private loan applications have a tendency far simpler and indeed the entire process is easier. But, interest rates and fees might be higher or lower depending on the specific loan program.
The most sought after alternative loans have no fees and interest rates that are approximately equal to the prime rate. This is the rate which banks charge one another or charge their largest and most favored customers. If you are able to get an interest rate at prime then this is a very good deal and getting a rate at 1% below prime is a great deal.
In order to obtain that 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 to the loan who has a great credit history.
Finally, the only way to find out whether an alternative loan will satisfy your requirements is to get out into the marketplace and take a look at exactly 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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