What are Alternative Loans?
Private or Alternative loans can be used to make up the difference between what your school offers you and what you have to pay. More than 40 companies offer more than 100 alternative student loan options, so you are very likely to find something that fits your needs, and there are NO GOVERNMENT FORMS to complete. You can use the eStudentLoan LoanFinder to compare these loans and find the best fit for you.
All of these loan programs will do a credit check and/or an income-to-debt ratio check on either the borrower, co-signer or both. Alternative loans are not federally guaranteed and can take several weeks to process. Typically, the lower the cost of the loan, the more restrictive it is.
Also, your eligibility for alternative loans may be affected by your government loans, whether your school participates in the FFELP or the FDLP programs, and other factors.
More about Alternative Loans
The purpose of alternative loans (also called private loans) is to supplement the student and parent education loan programs available from federal and state governments. These programs are established by private lenders, and some offer terms that are highly competitive with those of the PLUS and unsubsidized Stafford loans. Some can be more expensive.
Before obtaining an alternative loan, be sure to compare the terms with those of other loans, including federal and state education loans, home equity loans and lines of credit, personal lines of credit, credit cards, loans from retirement funds and insurance plans, and personal loans from relatives, friends, and neighbors. Calculate the total cost of an alternative loan before signing up for a loan that offers a lower introductory rate or a tiered origination fee (charged when the loan is taken out and then again when repayment begins). These can seem like better deals, but may have hidden charges and fees.
Keep in mind that the Federal Consolidation Loan program consolidates only federal loans and will not apply to loans received privately. Some alternative lenders may offer loan consolidation programs that consolidate federal and alternative loans, though they may be at higher interest rates. If this is a consideration for you, ask the lender about consolidation options and their costs before getting an alternative loan.
Before choosing an alternative loan, ask yourself these questions:
- How long has the organization been involved in providing student loans?
- Would my school's financial aid office recommend this lender?
- Does the organization sell its loans and if so, how often, to whom, and with what consequences?
- What special services does the organization offer to borrowers, including cooperation with the school, toll-free help lines, and campus representatives?
posted by Z3ede3 at
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