One of the hot-button issues right now within the lending community is in regard to private student loans, and whether or not lenders should make these kinds of loans available to individuals with bad credit.
The rise in demand for such loans over the past decade has been a clear indicator that college students would be willing to pay a higher interest rate and fees to gain access to such funding when they have significant credit issues, and the presiding issue right now concerns the actual existence of such private education loans.
Private Student Loan Reality
The reality is that currently very few, if any private student loan lenders have been making any exceptions when it comes to a student borrower’s credit unless they can provide a creditworthy cosigner.
The sad fact is that there are hardly any private lenders making available what some may regard as bad credit private student loans, and the few that were being fairly lenient only a few years ago tightened their guidelines once the economy tanked and the credit markets contracted.
Private student loans are, and always have been a credit-based loan product, and if you were ever confused by their nomenclature then you can be rest-assured that these kinds of loans are heavily dependent on your personal credit even thought they are technically considered to be “student loans”.
Taking Your Chances
So where does this leave you if you are a student borrower who may have had some credit issues in the past? Even though the credit markets have tightened considerably, some private lenders may still be able to work with you if you have an established credit history and a significant income.
If you have a credit history that contains some issues then it is going to be up to the lender whether they give you a pass or not, and if you are lucky enough to get an approval then you can expect to pay a much higher interest rate than what would be considered a “competitive” rate. It is going to be up to the lender where they draw the line, and you should always be ready to provide the lender an appropriate and thorough explanation of any issues that are readily apparent on your credit report.
You should only attempt to apply when you have credit issues if you have an actual credit history and income. Having no credit history or no income will get you an immediate denial, and no private lender will be able to make any exceptions when it comes to this.
If you have mediocre credit and a significant credit history then you can take your chances, but be forewarned that it is not going to be easy to get an approval, and you will probably have to apply to a number of different private lenders to improve your chances.
If you want to avoid this kind of aggravation then you should make the effort to find a creditworthy cosigner, as this will almost guarantee that you will get an instant approval with most private student loan lenders.
Moving Forward
This is the reality of getting a private student loan when you have bad credit, or no credit, and always remember that you have other options besides private loans that can help pay for your college education that aren’t as difficult to obtain, such as federal student loans.
You can get a federal student loan without a cosigner because they are based upon your financial need, and other miscellaneous personal factors instead of your credit and income.
This means that you don’t need a cosigner or good credit to apply, and by getting these kinds of student loans you can save a considerable amount of money when compared to limiting yourself to private funding due to the cost advantages that come with federal student loans.
