It is important that borrowers familiarize themselves with the requirements that come with private college loans. According to the Truth In Lending Act of 2009, private lenders of alternative loans are required to provide clear information on the terms and conditions of their loans. Also, the new application and solicitation disclosure requirements ensure that lenders issue information on interest rates. Disclosure of interest rates aids the borrower in comparing interest rates, terms and conditions of available lenders.
Alternative loans have an interest rate as all other types of loans. Although some private lenders may offer slightly lower rates on the loan, these interest rates are generally higher than those of federal loans. In choosing a lender, it is important to determine the general interest rates on the market so as to avoid loans with overly high rates. Also, borrowers should consider taking loans with a fixed-rate rather than variable interest rates. Variable interest rates can often go high after some time, making the loan repayment costly.
Private student loans are based on credit scores. Students can apply for a loan with a co-borrower or co-signor who demonstrates good credit scores. Co-signors are effective for students who have no credit and also those who have poor credit records. All borrowers to the loan have a responsibility of paying off the loan. Students with poor or substandard credit records may pay higher interest rates on their loans.
Private lenders are the primary source of alternative loans. The most common lenders include large financial institutions such as Citibank, Chase, Bank of America and Wachovia. Other companies include Sallie Mae, Astrive Student Loans and Act Education Loans. Students can also consider the National Education Loan Network, or Nelnet which offers lower rates and has a repayment plan of up to 25 years.