What Credit Score is Needed for Private Student Loans?
March 22nd, 2012 | Author: Stephanie
College can be very costly, especially for those who are pursuing graduate degrees or those who are in very expensive programs such as medical school or law school. Private student loans can be obtained through many different banking and lending institutions and are designed to help cover the extra costs of education. Unlike traditional student loans or parent loans, these are often considered the last resort for student loans. The rates for private student loans, even for those with good credit scores, tends to be much higher than your traditional or parent loan and should really only be used to cover any financial gaps your other financial aid just doesn’t cover.
As these loans are obtained through private banks and lending institutions, the exact requirements for approval may vary between institution. It is recommended that you have a credit score of at least 670 before applying, but you can still qualify with a lower credit score. As noted above, the interest rates on this type of loan tends to be higher than with other types of student loans, and the lower your credit score, the higher your interest rate will be. Unlike other types of student loans, these loans often have
a variable interest rate, as opposed to a fixed rate. Like unsubsidized loans, the interest will accrue while you are still in school.
In addition to, and sometimes more important that your actual credit score, is your credit history. You are likely to be declined if you have filed for bankruptcy, negative credit elements, unpaid charge offs, or delinquent or defaulted student or other loans.
If you need a private student loan, but do not have the credit score or credit history required for approval, you are not necessarily out of luck. You can obtain this type of loan with a co-signer as well. However, the co-signer will have to be someone you really trust and who has a great credit score and credit history as your worthiness for a loan will be based mostly off the co-signers history and score.
Unless you have excellent credit or just cannot avoid it, it is recommended that you pay for college through traditional student or parent loans. However, some degree programs are just too costly to be covered by typical financial aid options, making the private student loan the only option to fully pay for one’s education. Before signing on the dotted line, be sure that you understand all the terms and conditions for payback after college.