Getting Student Loans with Bad Credit
Most loans, such as home loans and auto loans require a good credit rating to get approved. If not, you’ll either end up paying significantly higher interest rates and other penalties. That or face being completely denied by most traditional lending institutions. However, for federal student loans, having a bad credit score is not a big issue.
An In-depth Look at Federal Student Loans
Unpaid debts or late payments may lead to a bad credit rating, making it more difficult for you to get a loan. As now you’re being perceived as a “high-risk borrower”. Not in the case of federal student loans though. This type of loan is different because it’s funded by the government and in most cases it won’t be require having a credit check performed. It is designed to provide financial aid for students who can’t afford a college education and have little credit history.
Federal student loans are loans specifically designed for eligible students with bad credits to help cover your educational expenses in college or university. You will be provided with subsidized or unsubsidized Stafford loans depending on your financial needs. When it’s subsidized it means the government will help you pay for the accrued interest of the loan while you’re still in school. Although Stafford loans do not give much emphasis on your credit history, it still may not cover the entire amount of your tuition. It has a limit of up to $5,500 for the first year (as of 2010) with an increase of $1000 every year until it reaches its yearly limit of $7,500 in your third year of school.
Offers Lower Interest Rates
Part of the government subsidized program is to make education as affordable as possible. This is why Federal student loans are in place to provide student assistance and school financial aid packages especially for students with bad credit. And since these loans are guaranteed by the government, they offer terms and rates which are far better compared to loans being offered by most private lenders.
Although Parental Loans for Undergraduate Students (PLUS) or private student loans can pay up to the full amount of your tuition, still, these loans have higher interest rates and do not offer flexible terms. With Federal student loans you can get an interest rate as low as 3.4% percent. Some private lenders will issue interest rates of up to 12% in this market and even higher if you have no credit history or in an environment where rates are higher.
Helps Finance Your Education
Getting a college education can really become a struggle, especially if you’re facing financial problems, much less having bad credit history. Parental Loans for Undergraduate Students (PLUS) or other private student loans,can be an enormous help however, your credit rating can be the deciding factor for lending institutions whether to approve your loan application and the interest rates you’re going to pay. That being said, there are still some ways if you’re really determined to get a degree even with bad credit. Applying for Federal student loans can be one of the greatest ways to help you achieve your dreams of continuing your education in college studies. Even though the loans being offered will be based on your financial need (you’ll only be receiving an amount on which you’re eligible). You can at least have a chance to fill the gaps between the amount left on your tuition through scholarships, family financial aids or other grants. With Federal student loans, there will be no intensive credit history check. On top of that the fact remains that these loans can offer more flexible rates and terms.