Finding money to fund your education can be a frustrating experience. This becomes all the more complicated and drawn out if you have bad credit. All private student loans will require a credit check and private loans are approved only if and when the private institutions lending you the money is satisfied and confident that you will be making regular monthly payments on your loan. So where does that leave a student with no credit or worse with bad credit? Read on and you will find that there still are options for those students that have poor or no credit.
Students with no credit
Let’s first look at the scenario where a student has no credit history at all. Many students fall in this category since they are still dependents and with no credit history to their name. If you are in this situation here are your options. Apart from of course exploring all scholarships and grants, your best bet when it comes to student loans is to apply for a federal student loan. Federal loans such as the Stafford loan or the Perkins Loan do not have credit checks and will be ideal for your situation.
Students with bad credit
Banks and credit unions actually prefer students with no credit over students with bad credit. This means your task of finding a student loan just got tougher. Here are a few things a student with bad credit can do. First off, try and improve your credit. Yes, improving your credit score and history takes time but start the process. Showing the banks that you are indeed back on track and paying off your previous commitments is much better than showing inaction on your part. Next, start with federal student loans. Federal student loans as explained above do not need any form of credit check and your past or current credit score or history has no bearing. Do keep in mind though that if you currently are defaulting on an existing federal student loan then you will be ineligible to apply for a fresh student loan.
Your next step is to tackle private student loans. Since federal student loans are need based and quite often don’t suffice money wise, you still need additional funds and this is where private student loans come in. This is the biggest hurdle for students with bad credit. Private loans are not approved without a credit check and since performing a credit check is the norm, your best option would be to apply for a private student loan with a cosigner. This way, the banks can perform the credit check on your cosigner. You will have a much better chance of approval and a much better loan term versus applying without a cosigner.
No reputable institution is going to lend you money without a credit check. The many promotions you see daily about student loans with no credit check often fail to mention the huge interest rates they carry and exorbitant fees that is added to these loans. With tuition costs rising each year, the money that you will be borrowing to fund your education is going to be fairly high. You need the best terms and opportunity to be able to saddle this high debt over a period of your loan term and eventually pay it off.
Alternate Student Loans
There are other options that a student with no credit or bad credit can look into. There are alternate loans such as the PLUS loans which are loans where the parent of the undergraduate student is the applicant. These loans come with a fixed rate of interest and have some great terms.
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