Student Financial Services
Student Financial Services


Financial Aid: Loans

Alternative Loans

Quick Links: Alternative Loan Providers and Entrance Counseling
                    Self-certification form

IMPORTANT NOTICE REGARDING DISBURSEMENT: Once you have been approved, it may take an additional 30 days before funds are received by the school. Please complete the loan application process 30 days prior to the start of your enrollment to avoid late fees assessed by SPU or holds preventing registration.

. General Information
. Research Your Options
. The Cost of an Alternative Loan
. Loan Resources

General Information

Terms and conditions for alternative (private) loans may be less favorable than those of federal student loans. We recommend that you use all eligibility for federal aid and fully explore the loan terms and options for repayment before applying for an alternative loan. The Free Application for Federal Student Aid (FAFSA) can be found here: www.fafsa.ed.gov. Borrow only what you need! Remember that excessive debt can have a negative effect on your future plans and lifestyle for years to come. The following resources can be helpful to determine if you need an alternative loan and how much you will need to borrow.

Alternative (private) loans are credit-based consumer loans offered by a lending institution; therefore, a better credit rating secures a better interest rate.

Regulations require the lender and borrower to complete several steps before the loan may be disbursed. Once you have been approved, it may take an additional 30 days before funds are received by the school. Please complete the loan application process 30 days prior to the start of your enrollment to avoid late fees assessed by SPU or holds preventing registration. If you are borrowing alternative loan funds, remember that if you request additional funds later in the year a second application may be required and the lender may need to pull your credit report again.

A self-certification form is required to receive an alternative loan; a borrower must complete and submit this form to the lender. The form is available from your lender or Student Financial Services. Student Financial Services will assist you to complete section 2 of the form. You may bring the form to SFS or follow the following steps:

  • Complete section 3 of the form
  • Email the form to sfs-info@spu.edu for completion of section 2.
  • The form will be returned to you via email for you to print, sign and submit to your lender.

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Research Your Options

Students may borrow alternative loans up to the cost of attendance, less financial aid, subject to lender loan limits.

Comparing information about eligibility, repayment and other terms and conditions for loans offered by different lenders will help you make an informed decision.  Much of this information will be available on the lender’s website.  You may also want to call the lender(s) for additional information.

  • Are there enrollment requirements, e.g. is the loan available for less than half-time or non matriculated students?
  • Is satisfactory academic progress required?
  • What requirements must be met to use the loan for past due balances?
  • Are there any fees?  What are they and when are they charged?
  • Does the lender offer benefits for on-time payments or automatic direct draft payments?
  • How long will you have to repay the loan?
  • Are there any prepayment penalties?
  • Are there any options to postpone or reduce payments?
  • What is the highest and lowest interest rate for the loan?
  • Is there a maximum amount of interest that may be charged?
  • Is the interest fixed or variable?
  • How frequently do variable interest rates change?
  • How often is interest capitalized (added to the principal)?
  • Sometimes you can get a better interest rate by having a cosigner, even if you don't need one.
    • Is a cosigner required?
    • If a cosigner is used will the credit of the borrower or the cosigner be used to establish the terms of the loan?
    • What are the requirements for releasing a cosigner?
  • Who will service the loan?
  • SPU utilizes ELM for efficient alternative loan processing and ELM/NDN for delivery of disbursements. If you select a lender that does not utilize ELM/NDN additional time may be required for processing and receipt of disbursements.

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The Cost of an Alternative Loan

Interest rates for alternative loans typically use either the prime rate or LIBOR (London Interbank Offered Rate) as the base rate. The margin is the additional percentage point added to the base rate by the lender. LIBOR variability has been smaller than the prime rate, which has tended to experience larger, sporadic changes. Remember that if the interest rate on an alternative loan is variable; the rate may increase or decrease over the life of the loan.

Interest will begin to accrue immediately, but most loans offer in-school deferment. Lenders will have different policies regarding when capitalization of interest occurs. When interest is capitalized, it is added to the principal of the loan. Therefore, the amount paid over the life of the loan will be greater if capitalization occurs more frequently.

Your credit rating will affect the interest rate you will be charged. Factors reviewed by lenders may include your debt-to-income ratio, the length of your established credit and your payment history. Borrowers will typically receive a better interest rate the better their credit rating is. The Fair Credit Reporting Act (FCRA) ensures that you can obtain a free credit report. You may purchase a credit score from one of the three credit bureaus or when you order a free credit report from AnnualCreditReport.com. The interest rate you qualify for will have a significant effect on the cost of your loan.

Loan Amount

Interest Rate

Loan Term

Monthly Payment

Total Interest Paid

Cumulative Payments

$10,000

8%

15 years

$95.57

$7,202.60

$17,202.60

$10,000

11%

15 years

$113.66

$10,458.80

$20,458.80

$10,000

18%

15 years

$161.04

$18,987.20

$29,987.20

Amounts in this chart are estimates and are included for educational purposes only.


Remember that a longer repayment term may mean a smaller monthly payment, but you will most likely pay more over the life of the loan due to interest that will accrue. For instance, consider the effect of lengthening the loan term in the chart below.

Loan Amount

Interest Rate

Loan Term

Monthly Payment

Total Interest Paid

Cumulative Payments

$10,000

10%

10 years

$132.15

$5,858.15

$15,858.15

$10,000

10%

15 years

$107.46

$9,342.80

$19,342.80

$10,000

10%

20 years

$96.50

$13,161.66

$23,161.66

Amounts in this chart are estimates and are included for educational purposes only.

A loan calculator can be helpful to estimate what your monthly payments would look like. It will be helpful to identify your existing financial obligations including any federal student loans and their estimated monthly repayment amount. You may also want to determine how much can be borrowed based on future expected earnings; using a Debt/Salary Calculator can be helpful.

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Loan Resources




Last Updated: 3/26/2013

 


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