Student Loans For bad Credit
Finding money for your education must begin always with scholarships and grants. Scholarships and grants allow you to significantly reduce the total cost of any borrowing you might have to do in the event that you need additional funds for your degree.
Once you’ve exhausted all eligible grants and scholarship programs, turn your attention to federal student loans such as the Stafford and Perkins loan. Federal student loans do not look into your credit scores or credit history for loan approval and are often referred to as no credit student loans or no credit check student loans. However most federal loans are need based and often have other requirements that make many students turn their attentions to private student loans.
Now with a private student loan, good credit is a requirement because all reputable financial institutions will run a credit check and evaluate your credit score and credit worthiness before they approve your loan. This process makes it very difficult for a student with bad credit or one with less than ok credit to find a student loan that has a decent rate of interest and loan terms. Most banks and credit unions usually add on additional fees and charges for bad credit student loans. Most fees will be a percentage of the loan amount and is deducted upfront from the loan amount before it is disbursed.
Bad Credit Loan Options
All is not lost if you have bad credit. There are alternatives and alternate loans that you can explore to get the funding for your education.
If you are an undergraduate student your first option should be to consider alternate loans such as PLUS loans. PLUS loans are made available to the parents of undergraduate students for funding their education needs and will often prove enough to cover any shortfall in federal or grant funding that you might already have. The rates for PLUS loans are fixed and often comes with deferment options allowing you to start payment of your loan after you graduate from school.
If PLUS loans is not an option for you then the nest step is to explore student loans with a cosigner. By applying for a student loan with a cosigner that has excellent credit you are basically offsetting all the negatives of your bad credit scores and history with that of the cosigner. You will have a much better chance of approval if you take this route and much better interest rates and terms attached to your loan.
If both the above options do not work for you then start contacting private lenders. Banks and credit unions do fund a small percentage of high risk loans such as bad credit loans as part of their portfolio and the only way for you to find the best loan terms would be to shop around. Try to improve your chances of approval by fixing or attempting to fix the issues that caused your bad credit in the first place. This will show to any potential lender that you are sincere in your attempts to pay back your commitments and worthy of taking a chance.
Bad Credit Student Loans summary
Funding is available. There are many private lenders that make money by lending money to students with bad credit. For them it is an opportunity to make more money than they would if they gave out the same loan amount to an ideal candidate with good scores. By increasing interest rates to make up for the high risk of default that these loans have, the lender hopes to profit . The point is that there are lenders that are motivated to lend money and you should make the best use of this funding option.
Always start your search by exhausting all options for scholarships, grants, federal aid, no credit check loans, alternative loans before you look into private loans. Private loans should be a small part of your funding only used to make up the shortfall from other lending sources.
Start early in your search. Work backwards from your school start dates and give yourself plenty of time to scout for options and find the best student loan for your needs.
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