Alternative Loans are loans made available to students to help cover educational expenses when all other options fail. These are NOT guaranteed loans.
- The student is the borrower
- These loans are credit-based loans that are not funded by the federal government and are approved based on the good credit history of the student and/or a co-signer. Co-signers may be required for an alternative loan for those students who have little or no credit history or those with a negative credit history. Some lenders may require a co-signer regardless of the student's credit history. The student must go through a credit check
- Many alternative loans have a variable interest rate that changes every quarter with no cap or a very high cap on the interest rate. The interest rate also can be related to the credit score of the borrower.
- As with an Unsubsidized Stafford Loan, you pay the interest while you are in college at least half time. You may choose to capitalize the interest in order to avoid making payments if you wish. However, this will result in you paying interest on the interest. If it is at all possible, choose to make the interest payments.
- Many lenders offer an Alternative Loan pre-approval process that is simple and quick. Some lenders will let you call in or fax in the information required for the pre-approval process.
