Struggling With Bad Credit? Here’s How You Can Still Get A Student Loan

When people are deciding whether to pursue a college education, its ever-increasing cost is one of the most important factors to consider. The price of attending college has grown exponentially in the past couple of years—increasing over 8 times quicker than wages—and people are struggling to keep pace with it.

For many students, attending their dream college relies on taking out student loans to finance their education. The National Center for Education Statistics reports that almost 60% of postsecondary students relied on loans to finance their college experience.

The process of repaying the loan is often talked about, but many people forego the aspect of obtaining loan approval itself. While much of the focus is on evaluating your loan options or choosing the best loan for you, it’s easy to forget that you have to meet certain requirements to be eligible for a loan too.

One of these is your credit score.

The Importance Of Credit Scores

This 3-digit number between the range of 300 and 850 is a representation of your creditworthiness. Essentially, all lenders consider potential borrowers against criteria that determines how likely they are to repay their debt. This numerical expression of you as a borrower depends on several factors, including:

• Your history of repaying debts, bills, and loans
• How many open accounts you currently have
• The level of debts you usually have
• How long you’ve been borrowing and repaying debts for
• The types of borrowing you’ve had
• Whether you’ve recently applied for new credit

A score anywhere between 300 and 649 is usually considered bad, while the 700 to 749 range is considered to be good. Luckily, the American average credit score is around 703—which is considered a good score. However, the bad news is that credit scores usually increase with age. According to research, consumers in their 20s have the lowest average credit scores, averaging around 660.

If you’re one of those people struggling with bad credit, all hope isn’t lost yet!

Powering Through Poor Credit

Credit scores don’t just determine whether you’ll be approved for a loan, but also influence the terms of the loan. Based on the loan you borrow, your credit score can have far-reaching implications.

The good news is that you can still apply for loans in spite of a less-than-stellar credit score. There are several ways you can work around this requirement to qualify for a loan, let’s take a look at some of them.

Opt for a cosigner

Since a low credit score signals to lenders that you aren’t a reliable borrower, you need to arrange a safety net to fall back on for loan repayments if you fall behind. Enlisting a cosigner with good credit usually does the job convincing lenders that you’re a viable borrower and may even qualify you for favorable low-interest terms.

While refinancing loans doesn’t usually involve a cosigner, as many as 90% of in-school private borrowing is done with the support of a cosigner. While you’ll be obligated to pay the loan on your own, the presence of the cosigner ensures the lender won’t have to write off bad debts or you won’t default on the loan payments.

Take out parent loans

Parents who want to support their children in making their college dreams come true can opt for parent loans. While the clear advantage of these loans is that your parents’ credit is considered by lenders instead of your own, it also makes them responsible for the loan’s repayment.

By taking out a loan in their name, your credit history isn’t affected and you may be eligible for lower interest rates as a result. However, the obligation of repaying the students’ debt can become a burden for the parent borrowers, affecting their current and long-term finances. It’s no wonder that parent loans alone have accrued $89 billion in student debt.

Step back and recuperate

Immediately heading off to college after your high school graduation isn’t a necessity. Instead of settling for unfavorable loan terms or involving your family members in long-term financial obligations, other alternatives are also available.

It’s entirely possible to build your credit score up and get it to a range where you can reap its benefits. After assessing your current situation, you’ll realize how much work is needed to establish a firm footing in the world of borrowing and debt repayment.

The good news is that your credit history probably isn’t that extensive. While this may work against you in regular circumstances, it can be beneficial because it means there’s less damage to undo. There are several ways you can improve your credit score through simple lifestyle changes and making a dedicated effort.

While you may not be able to head to college right away, taking a break to build your score will definitely save you thousands of dollars!

Refinance your original loan

The competitive world of private lending relies on good credit scores to secure low interest rates and favorable repayment terms. On the other hand, federal loans are easier to take out, but they may not offer as much in terms of long-term savings.

A great way to get loan approval at present and still enjoy low interest rates is to initially opt for a federal loan and then refinance it after building up your credit score.

If you start to restore your credit while you’re in school, you’ll make a considerable improvement by the end of the 4 years. When your credit score is in better shape, consider refinancing your loan with a private lender like Education Loan Finance and enjoy the benefits that come with your new loan terms. These may range from low interest rates and an extended repayment period to greater flexibility and control.

In Conclusion

Your credit score is an important indicator of creditworthiness and can impact several financial transactions in the future—including opening credit cards, mortgages, and future loans. While it’s essential to maintain a good credit score, you can work around a low score to make your college dream a reality.

About ELFI

Education Loan Finance is a student loan, parent loan, and refinancing provider who has helped countless students make their college dreams come true. The U.S. based company is has worked with several people over the years, providing benefits and savings from low interest rates to flexible loan terms.

Emily Scott is a blogger that has a passion for writing. She publishes content on various topics ranging from tips for event planning and interior designing to technological advancements and financial tips.