How to get a direct loan with a private lender?

For a student in need of financing, looking for a private lender that offers Direct Loans may be the only way to get the money he or she needs. Direct Loans are provided to borrowers who cannot qualify for federal student aid such as Stafford, Perkins, and PLUS loans. They allow borrowers who do not qualify for federal aid to get their education without having to worry about paying back any loans.
Not every private lender offers Direct Loans, however. When looking for a private lender that offers Direct Loans, be sure to do your homework. Find out how long the company has been in business, and find out if they offer the loans in your state.
Borrowers have two choices?

Borrowers have two choices for Direct Loans: private lenders that are members of The Education Finance Association (EFA) or non-members. Members of EFA offer their clients higher loan interest rates than non-members. Non-members receive lower interest rates, which may make the loans more attractive to students.
If a company is a member of EFA, check the EFA website for information on their programs. They also offer a borrower’s guide that provides a complete description of what each program entails. Every private lender is required to post information on their websites so borrowers can make an informed decision about the loans they take out.
Can student avail of this loan?

Students that do not qualify for federal student aid may still qualify for Direct Loans. However, loans are for students who need the money but do not receive federal aid. Because the loans are issued directly to the student, students must meet certain criteria to qualify.
Loans can only be taken out for courses in a student’s major. Also, loans cannot be used to pay for the cost of tuition, room and board, books, and other fees. In addition, Direct Loans cannot be used to cover student activities, recreational activities, orschool supplies. Students with Direct Loans can still use the money for personal expenses, including entertainment, to travel, and to purchase property.
When a borrower’s Direct Loan is used for personal expenses, such as entertainment, traveling, or buying property, the borrower is required to make a low monthly payment to the loan originator. In most cases, the borrower must first pay the original loan balance before any other loan balances can be paid.
As part of the loan process, borrowers are asked to sign a document, called a promissory note, which spells out all of the terms of the loan and outlines how the loan will be repaid. The borrower is also required to provide certain documents, which indicate how much he or she earns and the type of income he or she brings in. These documents are called employment verification documents and are also referred to as verification letters.
Borrowers also must present a guarantor to provide security in the event that the borrower defaults on the loan. A guarantor can be a relative, a friend, or a co-signer. If a borrower defaults on a loan, the guarantor must sign the contract of the Direct Loan.
What is a Federal Direct Loans?
Federal Direct Loans is offered in either fixed-rate or adjustable-rate loan terms. Under fixed-rate Direct Loans, borrowers pay the same monthly payment throughout the life of the loan. The interest rate is set and remains constant, regardless of how much the borrower makes throughout the loan term.
Adjustable-rate loans, on the other hand, are tied to the prime rate. Interest rates fluctuate based on market conditions, making these loans more favorable to borrowers. During times of lower interest rates, borrowers may enjoy lower monthly payments, while during times of high interest rates, borrowers may experience lower monthly payments.
Homeowners may also choose to apply for a loan that is backed by the Federal Housing Administration. This type of loan is not backed by the federal government and is not subject to interest rate caps. It is secured by the home and requires a co-signer who will help repay the loan should borrowers default.