Alternative or private student loans can be a great solutions to help you pay for college or graduate school. These private college student loans make dreams come true for many college students and are available through banks, credit unions, online lenders as well as other financial institutions.

It is important to realize right from the beginning that a private student loan is not a one-size-fits-all financial solution. In fact there are hundreds, maybe thousands, of these college student loans available in the U.S. In addition, because these college student loans are more flexible than other student loans (financial aid) and tend to have higher limits, you should be able to find one that works for you.

Having good credit will help you considerably when applying for a private student loan. As a matter of fact, you must have reasonably good credit to obtain one as a single borrower in the first place. If you do not have great credit, or if you have not yet built your credit, a co-signer with good credit can help you obtain a private student loan. When someone co-signs a student loan for you, in essence they are extending their good credit to you. This is because when they co-sign a student loan they agree to pay for it in the event you do not. A private lender will consider this an added security measure that the student loan will not go unpaid or into default.

Co-signer benefits go beyond just the student loan acquisition. Co-signers can also help you get a better interest rate on your student loan. Because private student loans are credit based, a co-signer with excellent credit can help you get a better interest rate and loan term. Therefore, if a trusted adult with good credit, such as a parent, is willing to co-sign a student loan for you, you would be wise to accept the offer. However, remember what you do with your student loan will affect your co-signer’s credit too. So be smart and responsible when paying it back.

As you begin to look for an alternative or private student loan, you should understand how each lender calculates interest. This will help you properly compare interest rates and fee offers. Some lenders will base their interest rates on the current LIBOR rate. This is ‘The London Interbank Offered Rate’ and it is the interest rate international banks charge each other to borrow the U.S. dollar. The second interest rate you should know about is Prime. Prime is an interest rate that lenders give only to their best customers, and it is usually the same rate at most large banks. In either case you will pay at least a couple percentage points above the going interest rate for a private student loan.

When you start comparing the different private student loan products available, you should be asking the lenders a number of questions to help you evaluate their different student loan products. The following should help you get started:

• What are the student loan’s limits? Can I take out more than my Cost of Attendance? Will other financial aid sources I received be subtracted from the student loan amount I am eligible for?
• What are the student loan terms? Will I have at least 10 years to repay the student loan?
• Can I defer the student loan while I am in school? Moreover, what are the terms of deferment?
• How will interest rates be calculated?
• What interest rates are offered with my credit rating? Are interest rates fixed for the life of the student loan, or will they change as banking interest rates in general go up and down?
• Will a co-signer help drive my interest rates down?
• What fees will I be responsible for?
• What will my monthly payments be? And, for how long?
• Do you offer a graduated payment system where I can pay more on my student loan as I begin to earn more?
• How much interest will I pay over the life of the my student loan?

Once a private student loan check has been sent to you, be sure you are wise with your money. A student loan check is not free money. In fact you will be paying off your student loans for many years after you have graduated. So be sure to set yourself up for financial success by only spending what you need and spending it wisely. When used right these private student loans can make higher education possible for anyone.

This entry was posted on Thursday, October 16th, 2008 at 9:09 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.