If you’ve applied for a loan before, you know how painful the underwriting process can be. But it’s even more stressful if you’re trying to figure out how to qualify for a personal loan when you already have student debt.
Student loans will show up as debt, which can affect how lenders rate the risk of giving you a personal loan. That’s why it’s important to figure out, “Will I qualify for a personal loan — even with my student debt?”
Knowing the personal loan qualifications you’ll need to meet can help you decide whether to apply for this type of debt or not.
How to qualify for a personal loan with student debt
When deciding whether to approve you 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 affordably 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.
Review your debt-to-income ratio
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 percent DTI. Lenders usually like to see a DTI of around 36 percent 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 find out your DTI.
Debt-to-Income (DTI) Calculator
Check your credit score and report
A decent credit history is also a key factor in how to qualify for a personal loan. This is a case in which student loans can actually help you qualify for a personal loans.
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 and will get the best personal loan rates.
Lenders might also have other credit requirements for personal loans. Some might expect a minimum credit length, like Payoff’s minimum credit length of 3 years.
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.
Consider your 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 an established career. Other lenders favor personal loan applicants who have completed a bachelor’s degree.
Increase your chances of approval
Based on the factors above, you probably already know the answer to “Will I 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 best lender.
But if you fall short in some areas or have already been rejected for a personal loan, there are some things you could try to improve your chances of approval.
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.
Maybe your credit score or credit reports are the problem. What if you missed a student loan payment or rehabilitated a defaulted student loan?
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.
When it comes to personal loan qualifications, student debt can both hurt or help your chances of approval. It’s possible, and even common, to qualify for 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 9 common mistakes borrowers make when getting a personal loan.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|5.99% – 24.99%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|