Direct-to-Consumer Private Loans

For those ineligible for government student loans, there are always direct-to-consumer private loans available. People who choose to go this route need to do their homework, since there are considerable variability in interest rates for private loans. So much depends on the applicant's personal credit score, the security that they can offer, and the lender that they are considering.

Credit score

The applicant's personal credit score plays a large part in what options they are offered. An Equifax score of 625 is considered baseline and an applicant with a score below is typically not considered by most lenders. The higher the applicant's score is above the baseline, the better rates they are offered, since the risk of defaulting on the loan statistically declines as the score increases. Those with low beacon scores are approved only by high-risk lenders. These lenders take on risky loans and charge high interest rates to make up from the losses from the large number of applicants who default on their loans.

What security is the applicant able to offer?

Unsecured loans have the highest rates of interest since the lender has no recourse if the applicant fails to make payments. A vehicle that is owned free and clear makes good collateral since the lender can repossess the car and sell it in the event of a default. This gives the lender some additional comfort in making the loan and therefore enables a lower interest rate for the borrower. The lowest interest rates are often land secured loans for the simple reason that the security's location never changes.

Private loans are able to assist students who do not qualify for federal loans. It is a good idea for the borrower to shop around since interest rates and terms vary widely among lenders in the private sector.