Bad Credit Student Loans: Options Available To You

Bad Credit Student Loans: Options Available To You

Like all banking credit products, private student loans are only available on successful completion of a check of the applicant's credit worthiness based on their credit history. Your credit history is built up over time based on how reliably you pay off any credit that you take out. Credit that counts towards this includes everything from your cellphone contract through to a mortgage. A bad credit history, with a lot of late or missing payments and even defaults, shows a bank that giving you credit would be a high risk.

However, what can also indicate too much risk to a bank when it comes to lending money, is if you simply don't have much of a credit history at all. This is the case for a lot of people going off to college - they simply aren't old enough to have built up a credit history yet sufficient to convince a bank to lend. And yet, often, they are in desperate need of finance to put them through school. So, if you are in this situation, where are the bad credit student loansall

Essentially, you have two options. You can either try and get a federal student loan, such as a Stafford loan or, if you can demonstrate a significant level of financial hardship compared with other students a Perkins loan, which has the lowest rate of interest of all federal student loan offerings. For federal student loans there is no credit check, so if you have no credit history or your credit history is even actually bad, this won't affect whether or not you are awarded the loan.

If these don't offer enough funding or you fail to get one, your other option is to apply for a private student loan with a credit worthy cosigner, so that together you can pass the credit check. A lot of people use their parents for this, but your cosigner can really be anyone who can pass the credit check and is willing to accept responsibility for your loan with you. Your cosigner needs to fully understand that they are taking on liability for the loan with you, and that if you fail to pay it back it will have serious negative consequences for them - they will either have to pay off the debt themselves or, if they can't, it will have a very serious impact on their own credit rating, and they may be at risk of being sued.

Essentially, there are no other options if you need a student loan now and don't have the credit history. There are products such as starter credit cards designed to help build your credit rating, but these methods do take time, and if you need funding now then you either need to find a cosigner or fill in and submit the FAFSA and try and get federal loans.

Many people find they need to take out both federal and private loans over the course of their college career, so be aware that this is something that may come up even if it doesn't yet, and have a conversation with your parents or other trusted people about their potential willingness to cosign with you ahead of time if you can, so you know if that is an option.