If you don’t have a high credit score and you’re interested in securing a private student loan, it may seem like the end of the world if a lender turned down your loan application.
Private student loan lenders are mostly interested in
They want to be sure that you can repay the debt if they decide to fund your education.
So they use your credit scores to determine if you’re creditworthy or not.
At that point, you may feel the entire weight of the world on your shoulder, but it’s not the end of the world.
You can learn about the credit score you need to get a private student loan here.
However, even with a bad credit, there are several different ways out.
How To Obtain A Private Student Loan With A Low Credit Score
Let’s dive right in!
Find Out Your Credit Score To Know Where You Stand
Lenders will check your credit score when you apply for a private student loan and you shouldn’t hesitate to do that too!
This is because your credit score will play a significant role in your approval.
But don’t fret, even with a poor score, I’ll show you how to get a private student loan.
There are several websites that offer free credit score checking services.
You should search for such sites on the web via Google or other search engines.
You can also ask your bank if they can help you check your scores for free or better still you can ask FICO directly though they’ll request for a payment.
If you don’t know how credit scores work, you should read this guide.
Also, you can see all the different factors that make up your credit score here.
Once you’re looking to obtain a personal loan, applicants with a credit score that is higher than 720 often pay an 11% interest rate.
Applicants with lower scores are required to pay almost three times higher – a whooping 29%.
Sadly, for applicants with a credit score that falls beneath 550, many private student loan lenders will simply show them the exit door.
See details of the credit score you need to get a private student loan here.
Never Take Out A Payday Loan
Once you’re in the “bad credit” zone, the bank wouldn’t hesitate to turn down your application.
Nonetheless, it wouldn’t take long for you to meet several different people on the web and offline offering “quick cash” for individuals with poor credit.
Although payday lenders will gladly offer you a loan, they’ll make you pay for more than what you expect. Don’t be surprised if you’re asked for an APR of 350% or even higher.
Such exorbitant rates is the reason why many low income borrowers are caught up in the web of predatory debt.
So if a payday loan was a part of your plan, forget about it right away.
Build Your Credit If It’s Bad
The sad news about bad credit is that even if you get a loan, you’ll be required to pay.
Nonetheless, your credit score is flexible. If you have a lower credit score than you expect, you should consider building it before seeking out a credit.
While it may seem like a really tough task that takes time, it is not rocket science.
You should take a look at all the things that affect your credit score here, so you’ll know why your scores are crumbling or rising.
A rule of thumb is to remain below 30% of your credit card limit to enhance your score.
Seek For Personal Installment Lenders
Building your credit is a great idea.
However, sometimes what you least expected may occur and you may require a loan as soon as possible.
In this situation, a payday loan may seem like the way to go, but there are several better options out there.
One of the best options to seek for a bad credit loan is from personal installment lenders.
You can use this type of loan to quickly resolve an emergency and unexpected expenses or to consolidate higher-interest debt.
Personal installment lenders use several different metrics when assessing a loan application.
In fact, they look beyond your credit score.
You should read reviews about any personal installment lender you’re considering and check them out with the Better Business Bureau.
Choose A Secured Loan
When you apply for a loan, a secured loan is an impressive way for a borrower with bad credit to enhance their request.
Here is how it works:
The borrower offers the lender an asset such as an automobile or even a home as a collateral.
This gives the lender some level of confidence and makes it easier for them to authorize the loan because they are confident that they can claim the asset if the borrower failed to pay the debt as agreed.
If you decide to opt for a secured loan, do not choose short-term, high-interest title loans.
They pose a very high risk which is usually not worth the amount of loan you’re seeking.
Join A Credit Union
Credit unions are good solutions for anyone with bad credit. To some extent, these unions act like banks.
However, when you’re seeking for a loan from them, they don’t assess your eligibility based on your credit score only.
But the challenge is you have to be a member before you can get a loan. So first you’ll have to convince the credit union in order to become a member.
Whatever credit union you’re seeking a loan from will review your financial health.
Other thing things they’ll consider include where you schooled, work and live.
Some professional groups also create their own credit unions. So you should consider finding one through your profession.
So how can you find one near you?
You can search on the web or directly visit mycreditunion.gov
Get a Co-signer
One of the best options to get a loan with a bad credit is to ask someone with a good credit score to help you out as a co-signer.
With the help of your cosigner, the loan’s interest rate will be calculated using the credit rating of the cosigner.
As such, get someone with a good credit rating to act as your cosigner.
Your parents, spouse, friend, loved one, relative, colleague or anyone who trusts you and is willing to help you out can act as your cosigner.
However, you have to make sure that you can actually pay up the loan because the cosigner will also bear the consequences if you fail to repay the debt.
Regardless of the option you choose, don’t forget to repay on time.
Also, building your credit score along the line will be a great way to get lower interest rates and to be eligible for several different loan programs.
You should consider setting up an emergency fund to cover for for some of your basic expenses so you wouldn’t need a quick fix loan every now and then.