It’s that time of your life you’ve looked forward to for so long and here it is, right on top of you! You thought you’d be ready but suddenly, there’s too much to do. Your wardrobe is set, you’ve got the perfect room and a best friend for a roommate, so what’s to worry about? It’s the money, honey.
It’s all about getting that school loan; your parents are worried too because they’re not loaded and their credit’s not the greatest, because they’ve had a little trouble getting loans in the past. And you don’t know how much you can contribute to your college expenses. Well, this certainly can be a stressful time for both you and your parents but perhaps we can help assure you that a bad credit student loan can be had if you know the right places to go. I’ll tell you right up front, though, it may not be easy but it can be done.
Yes, federal student loans are available and some banks, maybe yours, are planning to offer loans for college beginning this next year, according to Consumer Bankers Association. While a poor credit rating may make it more difficult to get a loan, do not be discouraged. In that particular situation, you probably will be better off to start looking to the U.S. federal government for a federal loan program; and there are many available.
Many lenders are out there willing to provide loans through the federal student lending program. And there are two loan programs geared especially toward those with poor credit ratings. The federal Stafford loan is available to all students as an unsubsidized loan, and to those in economic need as a subsidized loan. The interest rates for the subsidized loan have been quoted as low as 3.6% and as high a 6.0%; for the unsubsidized loans, the quotes are 4.2% and 6.8%. The other program, designated for those with greater economic need,is the federal Perkins loan, whose interest rate is quoted around 5%.
Although the federal loan programs offer lower interest rates, lower fees and more adaptable repayments there are some issues to resolve before committing to the loan. One is that there are limits as to the amount that can be borrowed, and often that leads to having to take out additional loans. Generally speaking, the maximum amount a freshman may borrow is $3,500 and it’s $4,500 for sophomores. This creates a problem for the parent or student seeking a bad credit student loan from a private company.
With the federal loans usually no credit check is required but of course it is required with the private loans. Therefore if an additional private loan is needed and your credit score is unacceptable, which is usually anything under the FICA score of 6oo or sometimes 650, either your application will be rejected or your interest rate will rise considerably.
Thankfully there are other avenues to pursue rather than the private loans if the federal loans do not cover all your costs. There is something called the PLUS (parent loan for undergraduate students)loan that allows the student to borrow the full amount of the cost, minus any other financial aid being received, with a fixed rate of interest. PLUS loans do not require any FICA score, but they do insist on a good credit history because they allow such a higher monetary limit than other loans, such as the Stafford loans. These loans aren’t for people who have filed for bankruptcy, but for others they bare looking into. The bright side is that if your parents are denied a PLUS loan your federal loan limits rise; check it out.
We certainly have not covered all of the material you might need to pursue a bad credit student loan, but it is a beginning, hopefully to encourage you not to give up your dreams for the future because of your bad credit rating. There are steps to take that will help you to improve your scores and to help you get your financial habits in order. Go online, check your credit scores, check out the Education dept web site, and take advantage of all the valuable research available.
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