How to Get a Personal Loan When You Have Student Debt

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Figuring out how to get a personal loan when you have student debt can be tricky. If you already owe a lot of student debt, lenders might see you as a risky candidate for a personal loan.

Fortunately, there are ways you can improve your chances of qualifying, such as decreasing your debt-to-income (DTI) ratio or improving your credit score.

Read on to learn what it takes to qualify for a personal loan as a student loan borrower, and how to improve your chances of getting one.

Personal loans for student loan borrowers: Key factors

When deciding whether you qualify for a personal loan, a lender is most concerned with your ability to repay it. They want to see that you’re in a financial position to cover your monthly payments.

This means lenders will definitely be taking a look at your debts — including student loans. But how a lender views your student debt will depend on a few factors.

Debt-to-income ratio

When considering a personal loan for a student loan borrower, a lender’s first concern is how much student debt you have and how it compares to your income. This, along with other debts you have, will determine your debt-to-income ratio (DTI). Simply put, this is the percentage of your monthly income that is spent on debt repayment each month.

For a monthly gross income of $2,000, for example, a $200 student loan payment plus a credit card minimum of $100 would give you 15% DTI. Lenders usually like to see a DTI of around 35% or less.

The higher your income, the better your DTI will be. Having small student loans and low student loan payments will also be an important factor in lowering your DTI.

Use the calculator below to determine your DTI.

Debt-to-Income (DTI) Calculator

Credit score and report

A decent credit history is also a key factor in how to qualify for a personal loan as a student loan borrower. This is a case in which student loans can actually help you qualify for a personal loan.

If you’ve made on-time payments on your student loan for the past few years, this will show you’re a responsible borrower. It can be a positive mark on your credit report and even boost your credit score.

Typically, lenders like to see at least an average credit score, usually in the upper-600s for FICO scores. However, borrowers with FICO scores in the 700s are more likely to qualify for a loan.

Lenders might also have other credit requirements for personal loans. Some might expect a minimum credit length. Payoff, for instance, considers your age of credit history, though it doesn’t advertise a specific length of time.

What’s more, some lenders will reject a personal loan applicant if they have a recent delinquency. This makes it all the more important to carefully track all student loans and ensure you never miss a payment.

Education or career experience

Having student debts might give you a higher DTI, but those student loans also made it possible for you to gain a degree and boost your earning potential. More lenders are considering factors such as your level of education and career experience when evaluating personal loan qualifications.

For instance, SoFi prefers borrowers who have professional experience. Other lenders favor personal loan applicants who have completed a bachelor’s degree.

Because many lenders look for professional experience, personal loans for students who are still in school can be hard to come by. If you’re having trouble meeting the education or professional requirements on your own, you could try applying with a cosigner.

Increase your chances of qualifying for a personal loan

Based on the factors above, you probably already have a sense of whether or not you’ll qualify for a personal loan. If it looks like you’d meet personal loan qualifications with your student loans, you can probably start getting rate estimates and shopping for the lender that’s best for your own situation.

But if you fall short in some areas or have already been rejected for a personal loan, there are two major steps you can take to boost your chances of approval:

Improve your DTI ratio

If your debt-to-income ratio isn’t favorable, you’ll need to either earn more money or lower your debt payments. You could also consider refinancing student loans to lower your monthly payments — and, in turn, your DTI.

Build your credit

Maybe your credit score or credit reports are the problem. If you missed a student loan payment or defaulted on a student loan, you might have a low score and a negative mark on your credit history.

If this is the case, don’t automatically give up on a personal loan. Many lenders have flexible lending standards, making it possible to get a personal loan with bad credit. You can also focus on repairing your credit and try re-applying in a few months.

Some effective strategies to improve credit include paying down your debts and keeping your credit utilization under 30%.

When it comes to how to qualify for a personal loan as a student borrower, college debt can hurt or help your chances of approval. It’s possible, and even common, to get a personal loan when a borrower already has student debt. It all comes down to how you’ve handled your student loans, and how that behavior is viewed by lenders.

Ready to apply for a personal loan? Check out these common mistakes borrowers make when getting a personal loan.

Rebecca Safier contributed to this report.