If you need funding for college but have bad credit, you might be wondering if you can get student loans. The good news is that most federal student loans don’t require a credit check, with the one exception being Direct PLUS Loans for graduate students.
But if you need more funding for school after maximizing your federal loans and federal student aid like scholarships and grants, private student loans might be your next option. Financial institutions that offer private student loans require a credit check and may have a minimum credit score requirement, so if you have bad credit, it could be tough to get approved.
If you’re looking for student loans for bad credit and need options, here’s what you should know.
Try to get a cosigner
As with any type of loan, having bad credit creates some challenges if you need extra funding for your education. If you’re looking to apply for private student loans with an adverse credit history, you’ll need a cosigner to get approved. Most private lenders already require a cosigner, but this is especially the case when it comes to having less-than-stellar credit.
A cosigner is a person who is legally responsible for the loan. In many cases, cosigners use their good credit to help the primary borrower (i.e., you) get approved for the loan. But if you fail to pay, the cosigner is on the hook for repaying the loan.
Because of the legal nature of cosigning a loan, it’s very important to find someone who feels comfortable with this arrangement. Typically, a cosigner is a family member or a spouse. Make sure you’re both on the same page about who is responsible for the loan beforehand to avoid jeopardizing your relationship.
Having a cosigner with a strong credit score — say, 700 or above — can boost your chances of getting approved for private student loans.
If you have a cosigner and are looking for student loans for bad credit, here’s where you can start your search:
- LendKey connects borrowers with community banks and financial institutions to offer the best rates. You can apply for competitive, lower interest rates with a cosigner to boost your chances of approval.
- CommonBond also offers private student loans and has a cosigner release option after two years of payments. That way, if you apply with a cosigner, you can have them removed from the account later on once you’ve demonstrated you’re a responsible borrower.
- Citizens Bank has private student loan offerings, and applying with a cosigner can help you get approved. Citizens Bank offers a cosigner release after making 36 payments.
- Credit unions may offer private student loans to borrowers with less-than-great credit if you have a cosigner. Research the options in your area with ASmarterChoice.org.
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What to do if you don’t have a cosigner
Finding a cosigner may not be easy. You’re basically asking someone to take on the legal responsibility of your loans — and that’s a lot to put on someone. If you can’t find a cosigner, don’t give up hope yet.
There are some private student loans without a cosigner that might be available to you, even if you have poor credit. Here are some loan providers to look into:
- Ascent offers student loans but doesn’t necessarily require a cosigner. According to the Ascent website, “Ascent considers several factors, including creditworthiness, school, program, graduation date, major, cost of attendance, and other factors that allow for students to potentially obtain a loan in their own name without a cosigner.”
- MPOWER Financing offers international students student loans without a cosigner. You can check your eligibility in one minute to see if you qualify.
Checking out these two options may give you a better chance at approval if you don’t have a cosigner.
Applying for student loans for bad credit
If you have bad credit and need private student loans, be mindful of where you apply. Check the eligibility requirements and see if there are any stated credit score requirements. They may have higher interest rates (either variable APR or fixed APR) and fees as well. Check your repayment options and any perks like forbearance and deferment. Private loans are not eligible for loan forgiveness and can be tough to discharge in bankruptcy.
If you’re unsure about whether you’ll get approved, consider applying through multiple lenders in a short period of time (within approximately two weeks). This short time frame might help your applications only be counted as a single hard inquiry on your credit report.
Hard pulls on your credit can trigger a red flag to creditors and lead to a slight drop in your credit score, so minimize them as much as possible. Be mindful about your loan application strategy, especially if you’re already faced with bad credit challenges.
Tips for improving your credit
Applying for student loans with bad credit can be stressful if you need the funding but aren’t sure if you’ll be approved. To improve your credit, be sure to make all your payments on time. If you have a credit card, keep your balances lower than 30% of your credit limit. If you also limit new credit inquiries and keep consistent positive borrowing habits, you can turn your credit around.
When your credit improves, look into student loan refinancing to score better interest rates on your student loans. Regardless of your situation now when it comes to private student loans and bad credit, there are many student loan options out there and various student loan providers to choose from. You aren’t doomed to have bad credit forever and may be able to get better rates with refinancing later on.