A private student loan—also known as an alternative student loan—is a credit-based consumer loan that can be used for any education-related purpose. Education expenses include tuition, room, board, books, a computer, lab fees, and transportation. Most private loan lenders will lend up to the total cost of education minus any financial aid received. Private student loans require no collateral, and they offer many of the same tax benefits as federal student loans (consult your tax advisor for advice).
Because private student loans are credit-based, you need to have an established credit history to be eligible. If you don't, you may apply with a creditworthy cosigner or have a creditworthy person apply on your behalf. A cosigner or sponsor may be a parent, relative, guardian, or anyone else who is creditworthy and willing to be responsible for the loan. Even if you meet the minimum eligibility criteria on your own, you should consider applying with a creditworthy cosigner to obtain the most favorable loan terms (e.g., interest rates and fees).
When you agree to take out a private loan you sign a promissory note, which is a legal contract. By signing this, you are agreeing to make timely payments of the loan principal and any interest or fees according to the schedule in the note.
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