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How To Apply Student Loan For Bad Credit? | 2022 Updates

Apply For Student Loan For Bad Credit

Think your bad credit may be keeping you from getting a student loan? While good credit is a great help in obtaining any type of financing, financial aid for students with bad credit is widely available. The most popular education loan, backed by the US Department of Education, the Stafford loan, is designed for people with no credit rating, since almost all applicants go to college right after the high school.

That is why it does not take your credit score into consideration at all. The Federal Perkins Loan Program, designed for students in need, does not either. The only stopping factor you might face when applying for such student loan for bad credit a previous default of federally funded financial aid.

Student Loan For Bad Credit

If your parents have better credit than you, financial help may be available. PLUS loans, given to parents and not to students, can be a perfect opportunity to finance college education.

Student Loan For Bad Credit
Student Loan For Bad Credit

Loans guaranteed by the US Department of Education, such as Stafford or Perkins loans, cover only part of the cost of education, assuming a student or their parents cover the rest.

PLUS loans are intended to help parents cover this difference by providing the necessary financing.

Can You Get Student Loan For Bad Credit?

Yes, as discussed above, you can get a student loan for bad credit. For one thing, most federal student loans do not involve a credit check. These include subsidized and unsubsidized loans for undergraduate students, as well as unsubsidized direct loans for graduate students.

The only federal loans that take your credit into account are PLUS loans for parents and Grad PLUS Loan for graduate students. These loans do not require excellent credit, but rather a simple check that you do not have “bad credit”. And even if you do, you can still qualify by applying with an endorser.

While you cannot get a private student loan for bad credit, you may qualify if you apply with a creditworthy co-signer.

It may also be worth looking into revenue sharing agreements, although these aren’t always good for everyone. Unlike student loans, ISAs provide education loan in exchange for a certain percentage of your future income for a set period. See our guide to ISAs to learn more.

What Should I Do If I Cannot Get Approval For A Student Loan?

Before you turn to private student loans, it helps to maximize your eligibility for federal student loans. Not only do most federal student loans not require a credit check, they also come with more flexible repayment plans than private student loans.

If you can’t get approval for a private student loan on your own, check to see if you can apply with a co-signer. If that’s not possible, speak with your school’s financial aid office to find out about alternative options. It might also be worth looking into ISAs as an alternative to campus based student loans.

Which Lenders Offer Student Loans For Bad Credit?

Technically, the Department of Education grants student loans to borrowers with bad credit because their federal student aid office doesn’t even check your credit report in most cases. If you are maximizing your federal loan allocation and need to borrow private student loan for bad credit, some lenders require you to either apply with a co-signer or lower their bar to qualify on your own.

Just keep in mind that applying for a bad credit student loan without the support of the co-signer almost certainly means you will face higher interest rates, which will increase your cost of borrowing.

Government Funding Is The Best Option For Students With Bad Credit

Government funded student aid is the best choice when it comes to bad credit borrowers because they have less restrictive underwriting criteria than banks and other lending institutions. If you are unable to secure federal funding for your college needs, it may be time to turn to privately funded loans. People seeking a degree in high-income fields such as medicine, law, and engineering have the best chance of being approved for such loans.

Student Loan For Bad Credit Aren’t The Only Path To College Funding

Student loans aren’t the only way to finance your education. A combination of resources, such as personal savings, personal grants, personal loans, and credit cards, can help you complete your college education. If your student loan for bad credit has a high interest rate, there are some easy ways around it.

Many student loan providers defer payments until a degree is obtained, giving you the opportunity to improve your creditworthiness while attending school. After you graduate, you may find it possible to refinance your debt at a lower interest rate, thereby reducing your loan payments to a more tolerable level.

The Best Student Loan Companies For Bad Credit

Methodology: U.S. News selects the best loan companies by evaluating affordability, borrower eligibility criteria, and customer service. Those with the highest overall scores are considered the best lenders.

To calculate each score, we use data about the lender and their loan offerings, placing greater emphasis on the factors that matter most to borrowers. Scoring factors for private student loan for bad credit providers are customer service scores, fixed APR, variable APR, availability of loan products, minimum and maximum loan terms, minimum and maximum loan amounts, Minimum FICO score and online features.

The weight that each rating factor receives is based on a national survey of what borrowers look for in a lender.

Best For Instant Approval

College Ave

College Ave exclusively offers student loan for bad credit. Founded in 2014 and based in Wilmington, Delaware, College Ave offers undergraduate, graduate, and parent loans for students enrolled in College Ave affiliated schools in all 50 states and the District of Columbia. The advantage of College Ave is speed, with apps that take minutes to complete and decisions made instantly.

Before Applying

  • Loan Types: Undergraduate, Graduate, Parental Loan, Refinance, MBA, Law School, Dental School, Medical School, International Student Loan.
  • Minimum FICO Credit Score: Not disclosed.
  • Co-signer required: Yes.
  • Better Business Bureau Rating: A+.

Best Features

  • Fast application and approval process.
  • Completion incentive career loan programs available.
  • College Ave student loan for bad credit have no origination fees.

Best For Product Availability

Sallie Mae

Sallie Mae is a publicly traded consumer bank that offers private student loans to pay for undergraduate, graduate, and specialty degrees. The company began in 1973 as a government entity that administered federal student loans. It went private in 2004 and offers a range of student loan for bad credit. Beyond student loans, Sallie Mae Bank offers savings products and credit cards with incentives to use cash back rewards to pay off student loan for bad credit.

Before Applying

  • Types of loans: undergraduate, graduate, MBA, medical school, dental school, law school.
  • Minimum FICO credit score: Mid 600.
  • Co-signer required: No.
  • Better Business Bureau Rating: A+.

Best Features

  • Student loan for bad credit fully cover expenses certified by the school – tuition, tuition, books, accommodation, meals, travel, and laptop.
  • Customer service is 100% based in the United States.
  • No loan origination fees.

Best For Fair Credit

Earnest

Earnest is an online lender offering private student loan for bad credit to current college and graduate students and graduate student loan refinancing. The company was founded in 2013. Borrowers can choose the terms of their loan to finance up to the full cost of their education.

Before Applying

  • Types of Loans: Undergraduate, Graduate, Parent Loans, Refinance, MBA, Law School, Medical School.
  • Minimum FICO credit score: 650.
  • Co-signer required: No.
  • Better Business Bureau Note: A.

Best Features

  • There are no original, request or delay charges.
  • You can choose your monthly payment and the duration of your loan.
  • You can use a co-signer for undergraduate or graduate student loans, and student loan for bad credit refinancing is available.

Best For Bad Credit

Ascent Funding

Ascent Funding is an online lender providing undergraduate and graduate student loans at over 2,200 qualifying schools nationwide. US citizens and permanent residents can apply for an Ascent loan as an individual borrower or with a creditworthy co-signer, as can those with Deferred Action Status for Childhood Arrivals – aka “Dreamers”. Other applicants must have a co-signer who is creditworthy and a U.S. citizen or permanent resident. Ascent Funding is based in San Diego.

Before Applying

  • Types of loan: undergraduate, graduate, MBA, law school, dental, medical, international student loan.
  • Minimum FICO Credit Score: N/A
  • Co-signer required: No.
  • Better Business Bureau Rating: A+.

Best Features

  • Borrowers can receive 1% cash back when they meet certain conditions.
  • Juniors and undergraduates may be eligible for Uncoordinated Outcome Based Loans from Ascent Funding depending on their specialty, cost of tuition, date of graduation, and other factors. These loans are eligible for a one percentage point rate discount with automatic payments.
  • Ascent Funding student loan for bad credit have no application, origination or disbursement fees.
Student Loan For Bad Credit
Student Loan For Bad Credit

Ideal For A Streamlined Approval Process

Citizens Bank

Citizens Bank was founded in the 1800s in Rhode Island. Today, it is one of the largest commercial banks in the United States, with branches in 12 New England, Mid-Atlantic, and Midwestern states. U.S. citizens and permanent residents can apply for student loan for bad credit from Citizens Bank, as can non-citizens with creditworthy citizens or permanent resident co-signers.

Before Applying

  • Types of loans: undergraduate, graduate, refinance, parental loan, MBA, medical school, dental school, law school, international student loan.
  • Minimum FICO Credit Score: Not disclosed.
  • Co-signer required: No.
  • Better Business Bureau Rating: A+.

Best Features

  • Citizens Bank offers multi-year approval loans, which means that once you get started, you’ll continue to get funding for subsequent years of study without having to go through a credit check every year.
  • Borrowers who take out automatic payments can reduce their interest rates by 0.25 percentage points.
  • If you have a qualifying Citizens Bank account, you may qualify for an additional 0.25 percentage point discount.
  • International students can apply if they have a co-signer who is a U.S. citizen or permanent resident with good credit.

Ideal For Multiple Reimbursement Options And At No Cost

SoFi

SoFi is an online lender founded by Stanford Business School students in 2011. Initially focused on refinancing student loan for bad credit, the company added private student loans in 2019. Its student loan for bad credit for undergraduates, graduates and parents start at $5,000 and charge no fees.

Before Applying

  • Types of loan: undergraduate, graduate, parent loan, MBA, medical school, law school, refinancing.
  • Minimum FICO Credit Score: Not disclosed.
  • Co-signer required: No.
  • Better Business Bureau Rating: A+.

Best Features

  • No fees: you won’t have to pay origination fees, administration fees, late fees or insufficient funds.
  • Flexible repayment options: SoFi offers co-signer release options, and borrowers facing financial difficulties can access programs and benefits.
  • Prequalification: Whether you are looking for undergraduate, graduate, or parenting loans, you and your co-signer can check rates and terms before submitting a full loan application without hurting your credit rating.

Best For No Fees

Discover

Discover Bank has been around for over 100 years and currently offers private student loan for bad credit to students attending over 2,400 colleges and universities. Loans as small as $1,000 and up to 100% tuition fees with fixed or variable rates are available.

Before Applying

  • Types of Loans: Undergraduate, Graduate, Parent Loans, Refinance, MBA, Law School, Health Professions, International Student Loan.
  • Minimum FICO Credit Score: Not disclosed.
  • Co-signer required: No.
  • Better Business Bureau Rating: A+.

Best Features

  • Loans as small as $1,000 are available. It can help families bridge the gap between financial aid and student personal expenses.
  • Co-signers are accepted. Parents or grandparents can choose to co-sign a loan for their student to help them qualify for a lower interest rate.
  • Discover does not have any original, request or delay fees.

Best For Minimal Fees

LendKey

LendKey’s digital platform connects borrowers in need of private student loans or student loan for bad credit refinancing with credit unions and community banks. Since 2009, LendKey has helped more than 120,000 people by financing $4.1 billion in loans. The company offers fixed and variable rate loans for undergraduate and graduate students.

Before Applying

  • Types of loans: undergraduate, graduate, refinancing.
  • Minimum FICO Credit Score: Undisclosed
  • Co-signer required: No.
  • Better Business Bureau Note: A.

Best Features

  • Borrowers can benefit from a 0.25 percentage point discount on the interest rate by signing up for automatic monthly payments from a checking or savings account.
  • Co-signers are not required, but can improve your chances of getting approved or help you get better terms that could save you money.
  • LendKey does not charge origination or request fees.

How To Build Or Improve Your Credit Score Before Applying For A Student Loan

If you have bad credit and know you’ll need a student loan for bad credit, improving your credit score before you apply is a good idea. Fortunately, there are plenty of ways to build your credit and increase your score.

But it won’t happen overnight. If you don’t have credit, you’ll need at least six months of credit usage to generate a FICO credit score, according to FICO, the credit analysis company.

A score damaged by serious misuse, such as foreclosure or bankruptcy, can take years to recover. On the other hand, a bad credit score could improve to be passable with just 12 months of responsible use.

Whether you’re trying to boost your credit score or build a credit history, these expert-recommended strategies can help you before you apply for a student loan for bad credit:

  • Pay your bills on time and in full every month. “The most important factor in determining credit scores is payment history,” says Block. “Unfortunately, it can take a few months for your score to improve if your credit history isn’t good to begin with.”
  • Consider a secured credit card. Secured credit cards work like traditional credit cards except that the credit limit is secured by a deposit you make when you open the account. The deposit is usually equal to your line of credit and can be used to pay off your account if you don’t. “Consumers with poor or no credit scores may have difficulty qualifying for a standard credit card,” says Paramita Pal, head of US bank cards at TD Bank. “In these cases, you might want to consider a secured credit card. Secure cards report to the credit bureaus, so proper use will help a score improve over time.
  • Ask someone with good credit habits to add you as an authorized credit card user. The primary cardholder is responsible for payments, but the account – and payment history – will appear on your credit report. Make sure you are relying on the credit of a trusted friend or family member, as their actions – good or bad – will be reflected in your credit history.
  • Take out a manufacturer’s loan. Unlike a traditional loan, a home builder loan deposits money into a savings account rather than giving it to you up front. You won’t be able to access the money until you pay off the loan, and then the lender will pay it back to you, plus interest. Typical loans range from $300 to $1,000, and borrowers pay in installments over six to 24 months, according to the Consumer Financial Protection Bureau.
  • Reduce your credit utilization rate. Reducing the percentage of total available credit that you use, called the credit utilization rate, is one of the fastest ways to improve your credit score. The amounts owed, which represent your credit utilization rate, are the second most important factor in your FICO score. The general guideline is to use less than 30% of your credit, if possible. If your available credit is $1,000 and you spend $500, your usage rate would be 50%. You can lower your rate by using less credit or asking for a credit limit increase – just be careful not to spend more at the same time.
  • Avoid carrying balances on your credit cards. Another way to improve your credit score is to pay off your card balances. “But don’t cancel cards you don’t use regularly,” says Pal. Another important factor in determining your credit score is the length of your credit history, according to FICO. A longer credit history will increase your FICO score, says Pal.

“Finally, it is important to keep an eye on your credit report to make sure that the credit agencies have accurate information on your balances, the number of lines of credit,” she says. “Inaccuracies can hurt a credit score. “

Apply Student Loan For Bad Credit

The three national credit bureaus – Equifax, Experian, and Transunion – are offering free weekly credit reports through April 2022 to help you watch for errors and signs of fraud during the coronavirus pandemic.

You can access it previously, you could get a free credit report every year from every credit bureau.

“Request your reports throughout the year and check for any errors,” says Pal.

If you think you spot an error on your credit report, you will need to dispute the information by contacting both the credit bureau and the creditor.

Can You Get a Student Loan Without a Co-signer If You Have Bad Credit?

You can get a student loan for bad credit without a co-signer if you have bad credit or no credit – most federal loans don’t require a co-signer – but private loans often do.

Unlike federal needs-based loans that are funded by the government, private student loan for bad credit from banks, credit unions, and online lenders require a credit history to prove that you can repay the debt. Many students have poor or no credit histories, making it difficult to approve private loans.

A creditworthy co-signer on a private loan can increase your chances of getting approved and earn a better interest rate than you would on your own.

If you don’t want a co-signer on your student loan for bad credit permanently, look for a loan with a co-signer release. This would allow you to release your co-signer from the loan after meeting certain requirements, such as making a certain number of payments on time.

What Is The Minimum Credit Score For A Student Loan?

Most lenders require a credit score of 650 to 670 for a private student loan for bad credit , but some do not have a minimum credit score. Instead, they base their credit decisions on several factors, such as debt-to-income ratio, earning potential, or household income.

Parents who want Direct PLUS loans will not need to meet a minimum credit score, but may not have an adverse credit history. This means that you cannot have debts 90 days or more past due or in collection, among other credit errors.