Getting Student Loans With Bad Credit and No Co-signer

What can you do if you wish to get student loans, but your credit is bad, and you have no co-signer?

Getting through college today can be extremely expensive. Tuition rates continue to rise each year, causing the cost of higher education to be out of reach for many students.

On top of tuition, there are additional costs like room and board, books, supplies, transportation, and more.

Without financial assistance, paying these high costs can be nearly impossible for most students and families. This is where student loans come in.

Student loans provide a way to borrow money to cover college costs you can’t afford to pay out-of-pocket.

These loans are provided by the federal government and private lenders like banks and credit unions.

The most common types of student loans are federal direct loans, which come directly from the government.

However, it can be difficult to qualify for federal loans if you have a poor credit history or lack an eligible co-signer.

So what can you do if you need student loans but have bad credit and no one who can cosign for you?

While it may seem hopeless, the good news is that you still have options to get student loans even with bad credit and no co-signer.

It just requires being strategic in your approach and understanding what lenders look for when it comes to borrowers with less-than-ideal financial backgrounds.

Here’s what you need to know about getting approved for student loans when you have bad credit and no one to cosign your loan.

Read Also: Student Loan Settlement

Getting Student Loans With Bad Credit and No Co-signer

Here are several tips to get student loans with bad credit and no co-signer:

1. Check Your Credit Report and Score

The first step is checking your credit report and score before applying for loans. This gives you an idea of what you’re working with so you can determine the best options.

You can obtain free copies of your credit report from AnnualCreditReport.com; many scores are also available for free.

Review your credit report closely – are there any errors dragging your score down that you can dispute?

Paying down balances, especially on revolving credit accounts like credit cards, can also help boost your score. Do everything you can to improve your credit before applying for a student loan.

2. Look Into Federal Student Loans

Even with bad credit, federal student loans can still be an option. Federal Direct Loans from the government do not require a credit check or co-signer.

Your student status, program/degree, and financial need are the only eligibility factors.

Complete the FAFSA application as early as possible to determine your federal loan eligibility.

Maximum federal loan limits are up to $5,500-$7,500 per year for dependent undergrads and up to $9,500-$12,500 per year for independent undergrads.

Graduate student limits are up to $20,500 per year. For many students, these federal loan amounts are enough to cover annual costs.

3. Consider a Federal PLUS Loan

Parents of dependent undergraduates can take out a federal Direct PLUS Loan on behalf of the student, up to the full cost of attendance minus any other aid received.

Applicants for a Parent PLUS Loan do undergo a credit check, but the credit requirements are more lenient than private student loans.

With a recent adverse credit history, you may still qualify with an eligible co-signer or by documenting extenuating circumstances.

4. Apply With a Co-signer

Asking a creditworthy co-signer with a good income and credit history to apply alongside you significantly boosts your chances of approval.

The co-signer agrees to be equally responsible for repaying the debt, so the lender feels more secure lending to someone with poor credit.

Start by asking parents, family members, mentors, or employers if they will cosign a student loan with you.

5. Seek Out Alternative Student Loans

There are non-federal private student loans specifically designed for borrowers with bad credit and no co-signer.

These are known as alternative student loans. Interest rates are typically higher and loan limits lower than standard private loans, but they enable you to get financing when other doors have closed.

Some alternative loan lenders are Sixup, INvestEd, LoanAtLast, Sallie Mae’s Smart Option Student Loan, SunTrust Bank, and Citizens Bank.

Compare interest rates, fees, eligibility rules, and repayment terms to select the most affordable loan.

Alternative loans should be a last resort after maximizing federal borrowing options.

6. Provide a Detailed Application

Lenders want to see that you have a solid plan to manage loan repayment after college.

That’s why thoroughly filling out your loan application is important, providing all requested income and employment information.

Include a detailed budget showing how you plan to afford living expenses and loan payments based on your expected future income.

List other financial aid you’ll receive to reduce your requested loan amount. Providing documentation upfront builds trust and shows the lender you are organized and committed to repayment.

7. Add a Qualified Co-signer Later

Some private lenders allow you to apply for a student loan independently, then add a co-signer later to release additional funds or convert to a lower interest rate.

If you get approved solo with a high rate or low amount, ask if adding a co-signer later is an option to improve your loan terms.

Having a few months of on-time payments already made can convince a co-signer to sign on and help you consolidate multiple loans into one affordable loan.

Moving your high-rate loan to a lower rate saves substantially on interest costs over the life of the loan.

8. Make Interest Payments While In School

Showing initiative by making interest payments on your student loans while you’re still in school looks very favorably to lenders.

They want to see borrowers taking repayment seriously right away. Making interest payments – even small ones – requires discipline.

It also demonstrates you can handle the responsibility and prevents balances from increasing with accrued interest when you graduate.

Set up automatic debits from your bank account to the lender for whatever amount you can afford each month.

Paying interest now means you’ll owe less principal later when payments kick in. Show this good financial behavior when reapplying for better loan terms.

Read Also: What Student Loan Should I Get

9. Apply With a Trusted Co-Borrower

If you cannot get approved for a private student loan with a qualified family member as a co-signer, consider applying with a responsible significant other or close friend as your co-borrower.

Choose someone with a steady income, a high credit score, and a current reputation for making timely payments.

Present your co-borrower as a wise influence who can ensure you stay on track with payments.

Emphasize details about their good financial character during the application process.

A trusted co-borrower can be as helpful as a family co-signer when approved.

10. Provide Collateral

Some lenders may approve your application if valuable property or assets are used as collateral for the loan.

Things like real estate, automobiles, money market accounts, certificates of deposit, business equipment, and investment accounts can be used as collateral.

The lender places a lien on the assets, meaning they can seize them if you default on the loan.

Only use this option if you have property or assets you could afford to lose if unable to repay.

The collateral provides the lender security, offsetting the risk of lending to you as a high-risk borrower. Just be sure you feel fully confident in making the monthly payments.

11. Seek Lender Exceptions

Feel free to appeal directly to lenders if your application is initially denied. Many receive exceptions or overrides on lending criteria if they call and politely explain their unique situation.

Highlight positive factors not evident from your credit report – like enrollment in a program leading to a well-paying career, family unable to cosign, strong grades, leadership experience, limited credit history, etc.

Provide teachers, employers, or community members recommendations to showcase your character.

Be persistent and convince the lender you are an exception from typical high-risk borrowers. They have some flexibility with approval criteria and may allow you to prove yourself.

12. Comparison Shop Multiple Lenders

Applying with several lenders maximizes your chances of approval. All lenders use different underwriting criteria and may view your situation differently.

Having multiple recent student loan applications shows lenders you explored options and chose them specifically because their loan products fit your needs.

A lender is more likely to approve your application when they can view data that other lenders recently extended your loan offers.

Cast a wide net and submit applications to 5 or more student loan companies to increase your odds.

13. Consider Peer-To-Peer Borrowing

Peer-to-peer lending networks like Upstart and CommonBond let investors provide funding for borrowers.

Investors view your credit, education, earnings potential, and purpose for the loan in deciding whether to fund all or part of the amount requested.

The appeal and story you convey regarding your need for the loan and plans after college help individual investors connect with you on a personal level and have confidence in funding your education.

Peer-to-peer lending offers more flexible underwriting and better odds of funding than traditional banks for those with bad credit or unusual circumstances.

Be transparent and personable to sway individuals that you are worth taking a chance on.

14. Seek Loans From Your School

Many colleges and universities have institutional loan programs to help students who need other financing options.

Interest rates are typically lower than private loans; some don’t require credit checks or co-signers. These loans are normally funded by the college’s endowment or alum donations.

Ask the financial aid office if institutional loans, emergency loans, or short-term cash advances are available directly through the school.

Some state loan authorities offer student loans only for residents attending college in the same state. Explore all potential sources of institutional lending from your school or home state.

15. Use a Student Loan Refinancing Strategy

An increasingly common tactic is taking out a smaller personal loan that doesn’t require co-signers or credit checks when enrolling.

Online lenders like Upstart and SoFi offer fast approval for small loans up to $5,000 or $10,000. This covers your tuition deposit so you can start classes on time.

After establishing 2-3 months of positive payment history on the personal loan, you can refinance it into a larger student loan with better rates and terms.

Your ability to handle the initial payments makes lenders more confident in refinancing you. Just be cautious of piling on too much high-interest debt that is unaffordable.

16. Attend Less Expensive Community College First

If you have exhausted all loan options at your preferred 4-year university but still need more funding, consider attending community college for your first 1-2 years before transferring.

Community college tuition is significantly less expensive, so loans are much smaller and easier to secure even with bad credit.

This allows you to establish a positive payment history on a small loan and improve your credit before applying for larger 4-year school loans.

You also have a chance to raise your GPA during your associate’s degree to qualify for more scholarships when you do transfer.

Attending community college first is an affordable stepping stone toward getting your bachelor’s degree.

17. Enlist a Loan Consultant or Advisor

As a last resort, enlist the help of a professional student loan consultant or non-profit financial aid advisor.

They help borrowers identify every potential option for funding college with bad credit. An advisor can assist with the application and appeal processes to give you the best shot at approval.

Some consultants even guarantee they can secure your loans or don’t charge for their service.

This takes the stress off you and provides experienced guidance when dealing with complicated student borrowing scenarios.

Consultant fees vary but can be worthwhile if they get you approved for necessary loans.

18. Create an Actionable Repayment Plan

Above all, putting together a clear and achievable plan for how you will repay loans shows lenders you’re serious about financial responsibility.

Submit this repayment plan with your application. Highlight steps you are taking now to prepare for loan payments: budgeting money, increasing income through part-time work, learning skills to secure a good job after college, limiting unnecessary expenses, pursuing scholarships, etc.

Demonstrate you are doing everything possible to set yourself up for on-time, in-full loan payments when grace periods end.

This goes a long way with skeptical lenders and convinces them you are an exception to other high-risk borrowers.

Final Thought

Getting approved for needed student loans without strong credit or a co-signer is challenging but possible.

Arm yourself with determination and use these strategies to convince lenders to give you a chance.

With wise financial planning after college, you can establish a positive credit history and pursue your career dreams.

Don’t let past financial mistakes or lack of family support stop you from moving forward.

Getting Student Loans With Bad Credit and No Co-signer