Referred to as alternative student loans or private student loans, this type of loan provides students with an alternative to state and federal government lending programs. Alternative student loans are the answer for many students because they have long-term repayment options and low interest rates, or when federal funding stops.
How Alternative Loans Work
Alternative student loans are usually credit based, which mean that any students who apply must have a good credit history or a co-signer with a good credit record. Repayment does not normally start until after a grace period of six months after college graduation. Some alternative student loans offer students greater interest rate cuts if they always make their repayments using direct withdrawal or are always on time. Some include releasing the co-signer from any responsibility with perfect repayment after a certain length of time.
Warnings of Private Loans
There are several alternative loan sources available for students, but some offer the borrower better rates and terms than others. Because financial institutions, banks, and other private lending sources are in business to make a profit from loaning money, you will not get the best terms and interest rates. It is best for students to spend time shopping around comparing the different alternative loans available and their rates, as they may vary from lender to lender.
Benefits of Private Loans
States typically have an approved party offering students alternative loans - much like federal loan programs. Alternative student loans normally have no lending fees; very low interest rates; and long term, flexible repayment options. Often, they have similar repayment plans like the ones the federal government offers.
For more information about private loans, visit CollegeScholarships.org.