Advance Fee Low-Interest Student Loans offers start with someone calling you (or mailing you) and telling you that for a small "advance fee" or "good faith fee," you can receive a "guaranteed student loan" at a very low interest.

Often, they approach you to apply for the loans while your child is still a high school sophomore or junior, telling you that you "must" apply years early in order to receive the student loan. This is simply NOT true - most student loans require that you actually be accepted to a school in order to apply for the loan!

Most of these offers are charging between $79 and $259, for a loan supposedly ranging from 2% to 5% interest.

Here's one problem: While it IS LEGAL for a loan company to charge you processing fees, etc., they do NOT usually charge them in advance. Fees are usually taken out of the check you receive when the loan has been signed.

LEGITIMATE student loans offered through the Federal Government, your school's Direct Lending Program, your local Bank or Credit Union, and other registered financial organizations NEVER charge a fee "up front" to apply. Be VERY careful to thoroughly check out any student loan offer that charges you a fee up-front!

What REALLY concerns me about most of these low-interest loan offers is:

They are usually offered only over the telephone.

You are told you MUST "act now" or the offer will be withdrawn (illegal!)

You must provide a checking account number or credit card number, over the phone, BEFORE you have had a chance to read the loan paperwork.

"This loan is not available anywhere else." Come on, get real! Banks are on every corner, of COURSE loans are available elsewhere!

"No credit check required!" Hey, that sounds great, and of course, is perfectly legal.

But in the "real world," NO bank or finance company is going to loan you money without a credit check. If they DO loan money without a credit check, they are going to charge you a lot higher interest, or require a substantial down payment.

They may say something like "we need your credit card number to hold this loan for you, but we won't charge the fees yet" - then next month when you get the credit card bill, you see a big charge on it and the company can't be found ANYWHERE!

Occasionally, they require the fee while your student is still a Sophomore or Junior in high school, to "hold" the loan until they start school. "Lock in this low interest rate NOW and save THOUSANDS when your child finally starts school!"

In general, NO legitimate finance company or bank is going to "lock in" a interest rate for more than thirty days. In many states, this is actually against the law.

When asked over the phone what their street address is, they give you a PO box, tell you they are in the process of moving, tell you that they are the "local coordinator" or "local processor", tell you that they are "in the area for just a few days" and give an address out of state that you don't have time to confirm, or just in general avoid giving out the address.

There are MANY MANY legitimate finance companies and banks out there. Especially in the area of student loans, there are so many legitimate companies right in your own neighborhood that you can explore to get a student loan. I strongly suggest if you are looking for a student loan, you contact the bank you already do business with FIRST before you deal with some company you have never heard of or never seen over the phone.

Protect yourself. It's your money, it's your child's education (or your education!) You spend many hours checking the references of a doctor before you allow him or her to do surgery on you, right? Why not spend the same amount of time checking out a company before you borrow money from them!