Do you have bad credit? If so, you may think it would be difficult or impossible to get the necessary student loans to help you pay your way through college. Thankfully, that isn't the case. There are ways to find student loans even if you do have bad credit. While there are no particular bad credit student loans, there are some loan programs that don't even check your credit. Here's what you need to know.
What Is a Credit Score?
If a student loan is the first loan you've ever applied for, you may have no idea what a credit score or bad credit is in the first place. Your credit score is a number that represents your credit worthiness in the eyes of lenders. It is calculated using information on how you've used credit in the past.
The five main credit score factors include your payment history, amounts owed, the length of your credit history, your credit mix and new credit. In general, a credit score of 720 or higher is considered excellent, a score of 640 to 719 is considered good, a credit score of 550 to 639 is considered fair and a credit score of 549 or less is considered bad. If you want to see your current credit score and learn more about how it is calculated, you can do so at My LendingTree for free.
How You Can Get Bad Credit
Getting a bad credit score can be easier than you'd like to think. Just one missed payment can put a big dent in your credit score. Other common negative marks that will lower your credit score include maxing out your credit cards, having a short credit history, not having many types of credit accounts and multiple inquiries for new credit accounts in the recent past. There are many more reasons why you may have a bad credit score, such as bankruptcy or judgments against you. However, the focus should not be dwelling on what you did wrong in the past but leaving your past behind and preventing any future credit mistakes from today going forward.
Federal Student Loans for Bad Credit
Now that you understand a bit more about credit scores and how you can get a bad credit score, there is some good news. You can get student loans even with bad credit or no credit at all. The Federal Direct Loan Program, sometimes referred to as Stafford Loans, and the Federal Perkins Loan Program both offer student loans without checking your credit score at all. Some federal loan programs are need-based while others are not.
If the Direct Loan Program and Perkins Loan Program do not offer enough aid to pay for your college needs, your parents may be able to qualify to take out Direct PLUS Loans. However, the Direct PLUS Loan Program does not lend to parents with adverse credit histories.
Private Student Loans for Bad Credit
Private student loans are an alternative to federal student loans. However, private lenders do look closely at your credit score since private student loans aren't guaranteed by the government. Obtaining a private student loan with bad credit is possible, but you'll likely end up with a high interest rate due to your poor credit history.
There are ways to obtain a private student loan with a lower credit score even if you have bad credit. You can get decent interest rates if you're able to find a cosigner, or someone who personally guarantees your debt for you, with a high credit score. Often, this will be a parent or another relative. However, adding a cosigner can be stressful to a relationship. If you ever miss a payment, the lender can make a negative mark on the credit report of both you and the cosigner. The lender will likely look to your cosigner to make the missed payments, too.
How High Interest Rates Can Impact Your Student Loan Repayment
High interest rates on student loans can have a huge impact on the total amount you have to repay to the lender. Due to the long repayment period, usually at least 10 years, your interest rate will have an even bigger affect than it would on a shorter term loan.
For instance, if you graduated with a 10-year student loan with a balance of $20,000 at an interest rate of 3.75 percent, you'd repay a total of $24,014 if you made your payments on schedule. However, if you end up with a bad credit student loan with an interest rate of 11.5 percent, you'd have to repay $33,743, or about $9,729 more than the 3.75 percent loan.
How to Get Multiple Student Loan Quotes
If you end up choosing private student loans, make sure you get multiple student loan quotes. Each lender offering student loans for bad credit may have different terms or interest rates. Finding the lender that has the best combination of term and interest rate for your particular situation could save you a decent amount of money.
You can get multiple quotes on LendingTree. Then, compare the quotes and pick the loan and lender that's right for you.