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San Diego State University

Financial Aid and Scholarships

Choosing an Alternative Loan Lender

You may choose any lender you wish. We do not recommend or endorse any particular lender, and SDSU does not maintain a preferred lender list.

These guidelines will help you determine which, if any, alternative lender you want to select.

Avoid deceptive offers

Follow the advice from the nation's consumer protection agency on how to spot and avoid deceptive offers and practices from private education loan lenders.

Contact your bank first

  • Contact the bank or credit union you use for your personal banking needs. Compare the terms of their loans with others that you research.

Lender should provide customary banking services

Choose a bank or credit union that offers checking/savings accounts, credit cards and different types of loans.

  • Banks are governed by banking industry regulations helping to make their practices more consistent and stable.

Choose a lender that has been in business for a long time

  • You will be doing business with the lender for the next 5 to 20 years (until the loan is paid in full) and may want to choose a lender that has been in the community at least that long.

Choose a lender that services its own loans

  • Ask the lender if the product is their own loan or if they are just reselling a loan that is actually serviced or guaranteed by another lender or agency.
  • Ask if they will service the loan until it is paid in full, or if they sell their promissory notes to another lender or loan servicing agency after collecting the loan processing fees. You should know with whom you will be doing business, now and when you repay your loan.

Private vs. federal loan terms

Compare private loan terms with the terms of the Federal Parent PLUS Loan. A PLUS is less expensive and has better repayment terms.

  • Federal regulation now allows parent borrowers to defer repayment on PLUS loans while their student is enrolled at least half time.
  • You will pay less interest over time with the Federal Parent PLUS Loan fixed interest rate.

Avoid high processing costs

Compare loan processing fees as well as annual percentage rates. The processing fees vary from lender to lender and some can be as high as 20% of the loan. A loan with a low interest rate but high fees can sometimes cost more than a loan with no fees but a higher interest rate. Look for a lender that does not charge any processing fees.

Repayment time or prepayment penalties

The time required to repay the total amount varies. Does the lender offer repayment options? A longer repayment term increases the total amount of interest paid even though the annual percentage rate may be lower than one with a shorter repayment term.

Know your lender

Compare the loan terms from the lenders you research. As a borrower of a private consumer loan, it is your responsibility to research and examine the terms and conditions offered by each lender.

Points to consider:

  • Lenders require a credit check and most require a cosigner.
  • Interest rates vary from lender to lender and often depend on your or your cosigner’s credit score.
  • The lender may or may not offer deferment or a grace period before repayment begins. Remember, with private loans, interest continues to accumulate and may capitalize during deferment.