Alternative loans are private loans (not part of the federal government programs) that are obtained through a lending institution.
Give yourself credit!
Lenders use credit scores to make fast and objective decisions on which applicants are likely to repay their loans on time. Credit scoring is calculated using many pieces of your past bill payment history (number and types of accounts, late payments, outstanding debt, and the age of your accounts). The way you managed credit in the past is often a good indication of how you will manage credit in the future. Therefore, your credit score is like a snapshot of your level of credit risk at a particular time. When your credit information changes, so does your credit score.
What should I look for in an alternative loan?
Annual Percentage Rate (APR)
What is the APR on the loan? The APR is the annual cost of your loan; it includes interest and the effect of any fees and charges. APRs will differ depending on the terms and amount of your loan. Make sure you compare like loan amounts when you compare APRs so you received a true comparison. If the rate is variable, the APR may change during the life of the loan. Carefully consider the terms and APRs when you borrow a private loan.
Do you want to know quickly if you qualify? Does the lender offer loan pre-approval over the phone or Internet?
How long is the repayment period you have to repay the loan? If you education costs require you to borrow large amounts, you may need a longer time to repay the loans.
Can you complete your federal application online and sign it using your electronic signature? This can significantly speed up your federal loan processing so you'll know how much additional money you will need.
When does repayment begin? You should make regular payments. If you have trouble making regular payments while you're in school, consider a loan that provides options for repayment.
Does the loan require you to have a cosigner? Does the lender offer a cosigner release option after you make a required number of on-time payments?
Does the lender reward you when you make payments on time? For example, does the lender reduce the interest rate for automatic payments? Does the lender offer an interest rate reduction after 24 or 48 consecutive on-time monthly payments?
Is there a maximum amount you can borrow? Does the loan have an annual of aggregate limit? Will these limits meet your needs? It's a good idea to borrow from the same lender each year, so make sure the aggregate loan limit is high enough to cover your costs throughout your entire education.
What happens if you choose not to pay interest while you're in school? If you choose not to pay the interest, it may be capitalized (added to your principal balance). When is the interest added? Annually? At repayment? If the interest is capitalized annually, the loan is more expensive than if interest is capitalized once at repayment.
Does your lender sell their loans? Some lenders sell their loans to a third party servicer while other retain ownership throughout the life of the loan. Ideally, you want a lender that services its own loans. If you loans are sold, all future correspondence should be sent to the new owner of your loan.
PLUS or Private Loan: What's Right for Me?
At Cedarville, we think it's important to factor Christ into any decision. Deciding how to finance your college education is an important decision. You should consider all of the factors that are important to you. Paying for your education is a life long investment.