Oct 13
15
How to Get a Student Loan With No Credit
Getting a student loan with no credit history impose a few challenges. For one, it is harder for financial institutions to assess if a student really has the capacity to pay. Hence, they are more likely to reject these types of applications.
To solve this problem, students often turn to a cosigner or a person that a financial institution can hold responsible for a loan. The cosigner should have outstanding credit reports and ideally, should not be paying for another type of loan. And this is when things get a lot trickier.
However, this does not mean that those with no credit history can no longer apply for a student loan. Here are the steps on how to get a student loan without a cosigner or with a bad or no credit history.
- Look for government loan programs
These programs do not require a credit check which means that it would not matter even if you have bad or no credit history. Here are some of the popular government loan programs you can try:
- Stafford Loans
There are two types of this loan. The first one is the subsidized loan wherein the government shoulders the interest rates provided that you are under at least a half-time enrollment. This type of Stafford loan is only available for those who meet a certain criteria both in terms of financial status and the FAFSA results.
Another type is the unsubsidized loan wherein you are responsible for the payment of the interest rates. The payment period usually starts after graduation. Also, you don’t need to meet as much strict requirements to become eligible.
- Federal Perkins Loans
Even though a credit check is not necessary in order to get approved for this loan, students who are already enrolled at participating schools are the only eligible. The funds are replenished by reimbursements and collections from loan cancellations.
One disadvantage of government loans is that borrowers or students are only entitled to borrow a certain amount. For Stafford loans, students are only allowed to borrow $12 000 a year depending on their college level. Perkins loans, on the other hand, allow students to borrow up to $5 000 a year.
- Consider private loans
Other financial institutions such as Wells Fargo offer private loans for undergraduates. However, finding an institution that offers private loans for students without a credit check is way harder than it seems. Ask successful graduates or do a careful review of the program’s requirements before you consider this option.
- Acquire collateral
By using your car or house as a collateral, you can secure payments for a few units which will look good on your credit report. Once you are finished with these initial units, you now have an ideal credit history for a loan aside from the government-funded student loans, allowing you to borrow more money per year.
- Build a good reputation
Once you get approved for either a government or private loan, you should start building a good credit history. Banks usually camp out in front of colleges and universities in order to attract students who are just starting to build their credit history. Some of them take this opportunity to offer credit card arrangements that can bury students in even more debt. This is why it is up to you to become financially responsible from this point.
Select banks that offer credit cards with ideal APR. Once you have a credit card, learn how to spend wisely. Take a look at your credit report whenever you have the chance in order to see how much you are spending.
Studying for college can either make or break your financial future. But with resourcefulness and a drive to achieve what you want, anything is possible.
Your Turn
Have you tried applying for a student loan even if you don’t have any credit history? How did it end up? Go ahead and share us your tips and experiences!