Most federal student loans (such as Stafford and Perkins loans) and grants and scholarship programs (such as Pell grants) do not require a credit check to be carried out and provide a student with significant financial aid. These programs are however need based and frequently carry other criteria that might make it difficult to qualify.
Even if a student does qualify, these loans only cover a proportion of the total education bill in many instances. If students are caught in this position then they may turn to alternative personal college loans to make up the financial shortfall, but private alternative educational loans can also have their own set of problems.
A credit check will almost always be required and this is not a problem as long as you have a good credit history. The problem is that ‘good’ is very much a relative term and if your credit report is not quite good enough then you might find that you are paying more than the usual interest rates for credit loans.
Fortunately, all may not be lost though as it is possible these days to find student loans for bad credit as well as a standard alternative student loan for bad credit.
On top of the quoted interest rate there are further monetary implications to student loans with bad credit. Fees will usually be tacked on to nominal loan amounts and relatively small bad credit loans of $3,000 may easily have fees of 4% applied before distribution. This means that $120 of the total will not be seen by the student but nonetheless has to be repaid. As a guide, every 3% of fees is equivalent to an additional 1% on top of the normal interest rate.
Private bad credit college loans do however carry a couple of advantages.
The first and possibly most obvious one is that money is available. Private lenders make money from the interest and fees that they charge and so have a vested interest in making funds available to borrowers and they will try hard to see that each and every borrower qualifies for a loan, even in the face of a poor credit score. Federal lenders on the other hand operate to an inflexible set of criteria and there is typically no appeal if your application is turned down.
Not having to deal with that unfriendly and frequently irrational bureaucracy is another benefit of alternative personal finance loans. Private sector lenders have customer service departments that are there specifically to deal with questions so that borrowers can get the answers that they are looking for. Federal loan programs usually have help available as well, but the answers one often gets are more miss that hit in terms of quality.
Other practical considerations which make alternative bad credit student loans desirable include:
The fact that neither students nor parents have to complete FAFSA (Free Application for Student Aid) forms and provide a mass of supplemental documentation. Private loan applications have a tendency to be simpler and indeed the whole process is easier. However, interest rates and fees might be higher or lower depending on the individual program and whether or not you are looking for student loans for bad credit.
The most sought after alternative loans attract no fees and interest rates that are roughly equal to the prime rate. This is the rate which banks charge one another or their largest and favorite customers. Getting an interest rate at prime is a good deal and finding a rate at 1% below prime is a great deal. To obtain that sort of loan it is normally necessary for you to have an excellent credit history but you can also get such a loan if you have a cosigner who has a great credit history.
In the end, the best way to find out whether an alternative loan will meet your needs is to go out into the market and see precisely what is available.
An alternative college loan is a necessity for most students to make up a shortfall in Federal funding but the problem for most students is that they feel they need to start their search by looking for no credit check alternative student loans. Do not forget however that there is a difference between student loans for bad credit and loans for somebody who simply has no credit history. In addition, remember that loans can often be obtained providing you have somebody who is willing to stand as guarantor on the loan for you.
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