Private or 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. You can use the 123-Student-Loan LoanFinder to compare these loans and find the best fit for you.

When you are comparing alternative loans, if everything else is equal, a lower APR (annual percentage rate) is generally less expensive--but calculate the total cost of borrowing to make sure. Also, calculate the total cost of borrowing 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 a better deal, but may have hidden charges and fees. Sound confusing? Here's the good news -- the 123-Student-Loan LoanFinder will do all of these calculations for you!

All private loan programs will do a credit check and/or an income-to-debt ratio check on either the borrower or 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 program, and other factors.

Before choosing a loan you may want to consider these important questions:

• How long has the organization been involved in providing student loans?

• Would my school's financial aid office recommend this lender?

• What is its loan volume?

• Does the organization sell its loans and if so, how often, to whom, and with what consequences?

• What perks does the organization offer to borrowers, including cooperation with the school, toll-free help lines, and campus representatives?

If you are planning a career in a field where you will be likely to have significant earnings (such as law, business or computers), chances are you'll have an easier time paying off your loans. When you graduate and get a job, you'll probably be earning enough money to pay off your educational loans in a reasonable number of years. If you are pursuing a less lucrative career, you should consider how you will be able to repay your loans before getting too heavily into debt. Likewise, students who are going on to graduate or professional school should carefully consider how their finances will affect their future options.

Opinions on comparing Alternative Loans :-

Are Apples-to-Apples Product Comparisons Possible? Useful? Accurate?
From: Gail Ferreira, Vice President, Educational Finance Group
(As seen in The Greentree Gazette, March 1998)

Product comparisons are always valuable. Coverage like this Gazette article informs us of features and options of competing private loan products, helping us differentiate one from another. Comparisons also help us identify trends in product development. For instance, the back-end insurance/guarantee fee, formerly employed in only a few products, has now been adopted by many products. Such trends also signal other providers, such as servicers, who are alerted to make service enhancements.

Comparisons are valuable in setting costs and prices. At Education Finance Group, we continuously monitor and analyze other programs' costs to help position ours as the most competitive in the marketplace. Additionally, we include a cost savings chart that compares our PLATINUM Student Loan Program with other alternative loans to better inform schools and students.

What are often more difficult to discern are the less tangible features offered by a particular product or loan provider. Shopping for these "soft" features doesn't always yield an apples-to-apples comparison. Instead, such factors lend themselves to assessment by way of benefits and disadvantages. For example, how flexibly does the provider accommodate unusual circumstances or special requests? By paying attention to these less tangible factors, a provider can create an alluring and appealing product. In addition to cost comparisons, compare benefits and disadvantages. Both will help you identify the products and providers that deliver what you and your students need and want.

(Reprinted with permission)

 

Private loan product comparisons- apples to apples?
From: Thomas W. Lustig, Vice President & Director of Marketing of PNC Bank
(As seen in The Greentree Gazette, March 1998)

Like apples or snowflakes, private loan products may appear similar, but they're rarely identical. Many colleges and universities that try to compare these financing instruments get caught up in the nuances of each specific loan program.

To perform a valid cost comparison, a borrowing scenario must be constructed. This must be complete with assumptions, variables, and forecast events. Then, each lender should score the total cost and compute the APR of its own products, not the products of their competitors.

Even when armed with cost information, the key to a private loan is its underwriting and its servicing. When a loan application is denied, the attractive interest rate is irrelevant. Many lenders actually use servicers to perform the credit checks. Servicers, because of strict contractual liabilities, may be less flexible in close decisions. So it often comes down to which lenders offer a good deal and will work with you on special situations and credit appeals.

(Reprinted with permission)

When comparing private loans, consider the following.
From: Jim Tolbert, President & CEO Career College Loan Company
(As seen in The Greentree Gazette, March 1998)

Affordability to the student. The cost to the student is more than just the interest rate. There also may be origination fees, insurance, and other upfront costs. Alternatively, for many borrowers affordability is more related to the size of the monthly payment than the overall cost.

Cost to the school. Will (The School) have to contribute, either directly or indirectly? Direct costs might include fees, discounts, and recourse payments for defaults. Indirect costs include the expenses a school incurs administering a loan program.

The expected proportion of students that will qualify. Typically, the lower the cost of the loan, the more restrictive it is. Higher-cost loans may be more advantageous for schools with potentially riskier borrowers.

(Reprinted with permission)