Supplement your college expenses with an Alternative Loan

2007-03-08 10:33:40

( Financial )



Although a federal student loan is the most affordable financial aid available, it does not cover all your college expenses. You may find that there is a huge gap between the proceeds of your loan and the actual expenses you incur.

An alternative loan is what you need to cover this gap. A private unsecured loan, it fills the gap between your awarded financial aid and your actual educational expenses.

It also offers several advantages:

1. More options. You cannot always count on receiving scholarships or federal financial aid. Hunting for scholarships takes time and applying for a Federal loan subjects you to an eligibility process. In both cases, there are no guarantees. In contrast, alternative student loans are not need-based and don’t require tedious application processes.

2. More freedom. Not all educational institutions choose to accept federal funding. Since alternative loans are available to all students, you have the freedom to pursue your education in any school you want.

3. Application is fast and easy. Most lenders have a quick credit approval system. Some will even allow you to apply online.

4. It is flexible. Federal loans often disburse funds after the school term has started. Alternative loans will disburse funds whenever the need arises. This is useful since some school fees have to be settled before the term begins.

Best of all, many alternative loans are designed to meet specific educational needs.

Compared to traditional loans, these private loans cover a wider range of eligibility. They are available even to non-citizens. Some lenders might require you to be enrolled in a degree program and maintain a minimum GPA, but many are more lenient.

You may even use these loans for student loan refinancing and pay for your college education debts.

You are, however, required to pass a credit check. But you are also allowed to have a co-signer, increasing your application’s chances of being approved.

A drawback to alternative loans is that although its overall cost is very reasonable, it may be higher than federal loans. Therefore it is advisable that despite the convenience it offers, an alternative loan should be used only after all other loans or grants have been exhausted.

You should also choose a lender with a consistently untainted reputation. Another thing you might want to ask about are the incentives included, if there are any. Some lenders offer special discounts for prompt payments.

Before going through the application process, ask about the overall costs. Ask if there are fees for disbursement and fees at repayment. Also ask about how interest rates are determined and if it is fixed or variable. You must also know about repayment options and choose the most feasible one. Lastly, know how often the interest is capitalized since less frequent capitalization means lower overall costs.

You might feel hesitant about taking out an additional loan to supplement your existing loans. To help you understand your options, check with your local student loan consolidation center for the most beneficial consolidation program for you.


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