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.
But private loans do have certain 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 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 mountain of additional documentation. Private loan applications tend to be far simpler and the entire process is easier. But, interest rates and fees could be higher or lower according to the individual loan 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.
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.
About the Author:
Visit TheStudentLoansCenter.com for information about paying for college including getting student loans with no credit check
No comments:
Post a Comment