Alternative student loans (also called private loans) are used to cover educational expenses, such as tuition, room and board, books and supplies. Although many students qualify for federal funding (grants, loans and work-study), quite often they still need additional funding to pay for all of their college-related expenses.
As a result, many students rely on alternative student loans to meet their financial needs. Fortunately, there are a variety of financial institutions that offer alternative student loan products, but it is up to the student to choose an appropriate loan product that best suits his needs.
Not all financial institutions provide alternative student loan services. However, many banks, credit unions, non-profit organizations and private lenders offer a variety of alternative student loan products for college students. Important factors such as interest rates, fees and repayment plans will vary depending on the institution, amount of the loan and the student's personal data. Also, some financial institutions offer private loans to parents to help them pay for their child's education.
There are certain benefits associated with alternative student loans. For example, alternative student loans do not require a fee upfront. This means that a student or parent can borrow the money without making any sort of down payment in advance. Also, students are not required to repay these kinds of private student loans until after graduation.
Once the student graduates from college, there is normally a 6-month grace period before the student has to begin repaying the loans to the lender. In addition, students usually have the option of consolidating their alternative student loans, which allows them to make lower monthly payments.
Alternative student loans are based on the student's credit history and sometimes there are income requirements, too. Therefore, a student will need to have good credit in order to get approved for an alternative student loan.
If a student does not have an appropriate credit score, then she may need a co-signer on the application. Quite often, lenders will approve a student with an appropriate co-signer. However, the co-signer must have an impressive credit history and she must also demonstrate that she can afford the loan.
It is important to use alternative student loans wisely and do not borrow more money than you actually need. You should only use alternative student loans after you have utilized other types of financial aid resources and once you have reached your limit on federal student loans. All students are required to repay their loans after graduation. So it is important to borrow money with caution and try to live within your means.