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| Obtaining an Alternative Loan |  The alternative loans are intended on supplementing the student and parent education loan programs given by federal and state governments. Private lenders established these programs, and some offer terms that are highly competitive with those of the PLUS and unsubsidized Stafford loans. But some can be more expensive.
Before obtaining an alternative loan:
1) Compare the terms with those of other loans, including federal and state education loans, personal lines of credit, home equity loans and lines of credit, loans from retirement funds and insurance plans, credit cards, and personal loans from relatives, friends, and neighbors.
2) Before signing up for a loan you need to calculate the total cost of an alternative loan and choose the one 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 better deals, but may have hidden charges and fees.
3) Pay attention that the Federal Consolidation Loan program consolidates only federal loans and will not apply to alternative. Some alternative lenders may propose loan consolidation programs that consolidate federal and alternative loans, but at higher interest rates. If this is important for you, ask the lender about consolidation options and their costs before obtaining an alternative loan.
4) Find out how long the organization has been involved in providing student loans. Get to know whether the organization sells its loans and if so, how often, to whom, and with what consequences. Learn what special services the organization offers to borrowers, including cooperation with the school, toll-free help lines, and campus representatives.
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