So is there such a thing as bad credit student loans?
Perhaps you’ve heard that bad credit makes it difficult to get approved for loans. Or, even if you are approved, you’ll pay the price through a high-interest rate on the money you borrowed.
Well, there aren’t bad credit student loans specifically made to allow you to borrow money despite your credit score. But that’s okay — you don’t need a special financial product just because your credit may not be so great.
In fact, some loans don’t take your credit score into account at all. Here are a few ways for you to get funding for college expenses that won’t leave you with debt at sky-high interest rates.
How to get student loans with bad credit
Federal student loans were designed to help all students get the aid they needed to pay for a college education. They’re not based on your credit score or history.
In fact, you don’t even need to go through a credit check before receiving offers for federal student loans. You do, however, need to fill out a Free Application for Federal Student Aid, or FASA. You’ll need to send information about your and your family’s financial situation within your FAFSA before you can review your loan options.
If you need to borrow money for school, start with federal student loans. You can get student loans for bad credit through the government because the offers are based on you need for help.
Federal student loans for bad credit
Federal student loans don’t take into account any past financial activity that may have dinged your credit score.
This means that people with no credit history at all can also apply for and receive federal student loans. You can get the funding you need to earn your college degree and build your credit history at the same time.
Just make sure you start making payments when they’re due. Also, look carefully at the terms of the loan. You’ll want to understand the interest rate, payment terms, and monthly payments to ensure you don’t borrow more than you actually need — or can afford to repay.
If you make your payments on time and in full, you’ll eventually repay the loan entirely and establish a credit history. This will help you out if you decide to apply for a car loan, mortgage, other types of loans, or a line of credit in the future.
Federal student loans are usually your best option if you have bad credit. In addition to not requiring great credit, they offer low-interest rates and a variety of repayment plan options.
Other student loans for bad credit
If you have bad credit, you may be thinking about taking out private student loans.
But, proceed with caution. This is where trying to find student loans for bad credit can be tricky — and cost you a lot of money.
Private lenders do base their approval process on your credit score. They run your credit and use that credit score to determine how much risk they take on by lending you money. The lower your score, the less likely you are to repay your loans.
Your credit score is the metric banks and other private lenders use to determine whether or not to approve you. One way to make it easier to get private student loans with bad credit is to ask a cosigner to help.
Someone with good credit can cosign your loan to increase the chances of your approval. That’s because the lender takes into account their credit score too.
However, it’s still your responsibility to repay the loan — and it’s important that you do so. Failing to repay your student loan doesn’t just hurt your finances. It impacts your cosigner’s credit, too.
Bad credit student loans can cost you
Your credit score is also used to determine the interest rate on your student loans when you work with a private lender.
This is where a bad credit score can cost you, even if you do receive approval for the loan. That’s because the higher the interest rate, the more money you’ll spend just to repay what you borrowed.
Private student loans also generally carry higher interest rates than federal student loans anyway. This is true even for people with good credit.
Check out these student loan calculators and run the numbers yourself. Look at how different interest rates impact how much you’ll pay on your loan over time.
Private student loans don’t offer the kinds of repayment programs and options that federal loans do, either. While they remain an option to help you pay for college, they shouldn’t be your first choice if you have bad credit.
Alternatives to bad credit student loans
But let’s step back even further. We know that private student loans shouldn’t be your first choice. That doesn’t mean that federal student loans are automatically your best choice either.
Acquiring debt may not be the smartest financial move if you already have bad credit. You still need to pay for school, of course. But maybe taking out bad credit student loans isn’t the option for you.
There are alternatives to student loans. You can look for scholarships and grants. Or, work for an organization that pays for college tuition, especially if you’re already in the workforce. Other companies may help you repay your student loans that you already have, too.
You can look for other ways to earn extra money on your own. You can also make the most of your cash flow. Learn to cut your expenses and live well on less by being frugal. This should free up more money to put towards school.
Any of these options can help reduce the amount of money you borrow for school. It’s well worth exploring ideas and creative solutions and making the effort to take out as few loans as possible. Your future self will thank you, trust me.
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