All college students, regardless of their credit standing, are encouraged to start with free money options, such as scholarships and grants, along with Federal Financial Aid (FAFSA) before considering private student loans as a funding option. Once a student has exhausted all of their scholarship and federal financial aid options, private student loans can be considered to help cover any of the remaining college expenses.
Why Scholarships, Grants and Federal Student Loans First?
Federal student loans and grants, along with scholarships are not based upon a student’s credit. Private student loans, on the other hand, are based upon a borrowers credit score. A high debt to income ratio, little to no credit history, or a history of bankruptcy will likely affect a student’s ability to secure a private student loan. For students who have poor or little credit, obtaining a private student loan will be a difficult task, given that private student loans are so heavily based upon a borrowers credit. However, this does not mean that all students with bad credit will be unable to get a private student loan. There is an option you may utilize to secure a private loan regardless of your bad credit standing.
How Can I Get A Private Student Loan Even Though I Have Bad Credit?
If a borrower is unable to secure a private student loan because of their bad credit, one of the only potential ways around this situation is to obtain the help of a creditworthy cosigner. Finding a cosigner with excellent credit will improve the borrowers chance at securing a private student loan, and because many private student loan lenders break their interest rates and/or fees into tiers based on credit score, the borrower may also be able to secure a better rate with the help of a creditworthy cosigner.
Finding an eligible cosigner with great credit, who is willing to be held responsible for your student loan debt will not likely be easy. When an individual agrees to cosign the private student loan along with you, the two of you are co-borrowing the money together, thus BOTH parties are equally responsible for the debt. Many individuals will not want to assume the risk to their own credit profile in the event that things do not work out as planned. If you are unable to find an eligible cosigner that is willing to help you out, the reality is that without improving your own credit score, securing a private student loan will be unlikely. Private lenders simply do not want to take the risk of lending money to a borrower who has a spotty credit history, or no credit history at all.
What Options Do I Have Without A Cosigner For A Private Student Loan?
If you still need money for college, have applied for scholarships and FAFSA, and can’t get a private student loan because of bad credit and no cosigner, you need to make an appointment with the financial aid office at your school. Your school may be able to help you with additional financing options you were unaware of, and the financial aid staff will be able to best address the financial obstacles specific to your personal situation. The important thing is not to get discouraged, but to reach out for help. Your school’s financial aid staff is there to help provide solutions to qualified students who are struggling with financing their college education.