It’s not a secret that bad credit can make it a challenge to get a personal loan. But, did you know—you might also struggle to find the best student loans if you have bad credit when you go through the application process.
Do you delay your college or higher education if you can’t get a loan? How do you pay for school? Is bad credit keeping you from pursuing the degree you need to start your career?
It can be challenging to get a student loan while your credit isn’t good, but it’s not impossible. Check out these seven tips for finding student loans for bad credit.
1. Apply for FAFSA
FAFSA (Free Application For Federal Student Aid) is your starting place to apply for federal student loans. We’ll talk about prioritizing federal loans in a minute.
Starting your education funding with the FAFSA application makes you eligible for several types of federal loans. You’ll also have the opportunity to qualify for education grants. Many students use a mix of loans and grants to fund higher education adequately.
You won’t need to repay most grants. However, no matter the type of loans you receive, you’ll need to repay them.
2. Start With Federal Loans
When searching for college loans, you’ll find private and government options. With bad credit, focus on federal student loans first.
Federal student loans don’t consider your financial history the same way traditional loans weigh your good or bad credit history during the application process. This helps students with bad credit qualify for federal loans.
Many federal student loans come with better payment options than private loans. Federal student loans come with federal financial backing. This allows more flexibility with repayment options if you find yourself under tremendous student loan debt after completing your degree.
If you already have bad credit, you don’t want to make it worse by delaying (or defaulting on) your student loan payments.
3. Know the Types of Federal Loans
Some federal student loans approve students for funding based on financial need. Other loans don’t weigh financial needs at all. You can save yourself some time and effort by understanding the types of available loans, then applying for the loans you’re most likely to receive.
Direct Unsubsidized Loans
Undergraduate and graduate students can qualify for direct unsubsidized loans, regardless of your financial need. Your school determines factors your costs for classes and living expenses to determine how much you can receive.
Students pay the interest on an unsubsidized loan while they’re in school. Then, the loan repayment schedule adds the principal to your payments after you finish your degree.
Direct Subsidized Loans
Unlike unsubsidized loans, undergraduate students can receive subsidized loans based on financial need. Not everyone is eligible for this type of federal student loan.
While you are in school, the government pays the interest on your subsidized loan. After you graduate, you begin principal plus interest payments to complete your loan repayment.
The Perkins Loan
While the Perkins loan is a federal loan, your funder is your school. These loans go to students with exceptional financial need. The interest rate is around 5%, which can be lower than interest rates on other loans depending on your credit score.
It’s an excellent loan for students with bad credit if you receive it. However, not every school chooses to offer Perkins loans.
4. Try a PLUS Loan with Your Parents
When applying for student financial aid, your parents can help! The PLUS Loan is available to parents of dependent college students. If you have bad credit and can’t qualify for enough education funding, your parents can apply for a PLUS loan on behalf of your college expenses.
Your parents don’t need excellent credit to receive a PLUS loan. However, bad credit can disqualify them from the loan.
5. Check Into Private Loans
If you’ve exhausted the options for federal loans, research your options through private student loans. However, the qualifications, interest rates, and repayment schedules for private loans can be different than federal loans.
- Interest rates are often higher for private loans. Interest rates can also fluctuate. If you have bad credit, you might find it challenging to receive a private loan at an interest rate you can afford.
- You’re responsible for repaying all interest. Private loans don’t receive subsidized funds to help you repay the loan. You’ll need to repay the full principal amount plus interest.
- Payment options can be less flexible. Since private lenders fund these loans, they might not be as flexible as a federal loan with the terms to repay the loan.
Private loans can be a good addition to your total funding package. Be sure you understand the rules and the repayment schedule!
6. Try a Personal Loan
We mentioned it could be tough to qualify for a personal loan with bad credit. However, if you’re running out of funding options, a small personal loan can go toward paying education expenses or covering living expenses.
Watch out for high-interest rates. Bad credit can lead to high-interest rates that make a personal loan tough to pay back. However, a small personal loan can be the additional financial help you need to finish your degree and start your career.
7. Get Creative
Depending on your credit score and your financial needs, you might need to get creative to fund your education. A combination of loans and grants can get you on your way. Consider a part-time job or work-study job to help with living expenses while you’re in school.
Get Help With Student Loans for Bad Credit!
When it’s time to repay your student loans for bad credit, it can be overwhelming to have multiple loan payments every month. Student loan consolidation helps you keep up with your monthly loan repayment balance with a single payment.
Bonsai Finance is here to help you find the funding you need for your education—no matter your credit score. Don’t delay your education! Learn more about Bonsai Finance and how we can help.