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.



However, alternative educational loans also have their pros and cons. A credit check will almost always be required and this is no problem as long as you have a good credit history. The problem is that 'good' is very much a relative term and if it is not good enough then you will find yourself paying more than the normal rates of interest.

As well as the quoted interest rate there are additional financial implications of private alternative loans. Fees are normally added on to nominal loan amounts and a reasonably modest loan of $3,000 can easily have fees of 4% applied prior to distribution. That means $120 of the total is never seen by the student but nonetheless had got to be paid back. As a rough guide, 3% in fees is equivalent to 1% on top of the stated interest rate.

However private alternative loans do carry a few 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 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 considerations which make alternative loans especially 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 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.

In order to get this 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 who has an excellent credit history.

When all is said and done, the best way to discover whether an alternative loan is going to suit your purposes is to go out into the market and see exactly what is available.