Need Student Loans but Have Bad Credit? No Problem...

By Sean Longford

Thousands of adults every year are returning to college and are looking for student loans, but they have bad credit. For most, these two problems go hand-in-hand. They never started and/or finished college, so they ended up in a low-paying job that required them to get loans just to survive. Then, of course, their low wages didn’t enable them to keep up with their loans and they defaulted, resulting in a bad credit score. It’s a vicious cycle. The good news is that student loans function a little bit differently than the average loan and this may work to your advantage.

The first thing that you need to keep in mind is that payments on student loans are deferred as long as you are in school. Because of this, lenders often feel safer making these loans to people with bad credit. The lender is essentially banking on you graduating from college and getting a high-paying job that will enable you to pay off your student loan. This may enable you to get into a student loan much easier than you would a normal loan. You may be given a higher APR (annual percentage rate) because you are considered high-risk, but at least you’ll get the loan. Also, because the loan is deferred you don’t have to worry about it immediately piling onto your other debt that got you into financial trouble.

Another thing to consider is who most student loans go to: new college students. Now obviously, your average eighteen-year-old doesn’t have great credit. In reality, chances are he or she has no credit whatsoever because his or her parents have paid for everything up to this point. It’s not necessarily bad credit, but in many cases it is just as bad as there is no record of what this person is like financially speaking. Once again, lenders are taking a gamble that this kid with no credit is going to come out of college and get a great job that will enable them to settle their student loans in a timely manner.

One thing that you need to avoid if you have bad credit and are searching for a student loan is the fly-by-night lenders out there. Many of these lenders you’ll only hear about through random banner ads on websites or through spam email. If you are extremely desperate, you can consider one of these loans, but make sure you thoroughly read over the fine print before you sign anything. You may also want to get an accountant, financial advisor, or someone who is more financially-savvy than you to read over the loan. Some of these loans are worded so as to be confusing and get you stuck in a bad loan, with your only options being pay off the bad loan or declare bankruptcy.

Conclusion

In the end, you don’t need to give up hope if you have bad credit but want a student loan. There are many options out there for you if you want a student loan but have bad credit, you just have to look for them.

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