Alternative Student Loans for People With Bad Credit

Many government0backed loans are available to students, even if they have a poor credit score. These loans, both subsidized and unsubsidized, can be obtained at a relatively low interest rate. The Department of Education provides several loan types, such as Stafford, Perkins and Plus Loans. They are more likely to be understanding about a poor credit rating due to things like unpaid medical bills than a private lender. If they turn you down for a loan, you can appeal. You might be required to submit a letter detailing why you have a low credit score. Another benefit to a government-backed loan is that the student does not have to begin repayment until after she graduates, or her attendance falls below half-time. Before you can apply for these loans, you must first submit a FAFSA application. You can go to the Department of Education's website that allows students to apply for aid and get answers on an array of financial aid topics.

Some colleges offer what are know as direct loans. With this type of loan, The Department of Education itself acts as the lender as opposed to simply acting as the guarantor, as is normally the case under the Federal Family Education Loan Program. A direct loan allows a student to deal solely with the Department of Education, which can be advantageous for someone with very bad credit.

Beware of services that tell you that they can help you through the red tape of obtaining loans with either the government or an outside lender. Often, their goal is to charge you a great deal of money to do what you can usually do either by yourself, or with the help of a financial aid counselor. When it comes to the best source of assistance in determining loan types and eligibility, your school's financial aid office is the best place to go, and it's free. A financial aid counselor can help you prepare your loan application and give you information and advice on finding out what loan best fits your particular circumstances.

This is one of the easiest ways to have a loan application green lighted if you have bad credit. Often, a family member or friend who has good credit, and is willing to cosign with you, can make the difference between being approved for a loan with a private lender, or being turned down.

The Department of Education's Plus Loan program option is also for people with poor credit. With this type of loan, a parent takes out a loan on the student's behalf using his good credit score. On the down side, there is no repayment grace period with a Plus Loan. On the up side, a parent can often borrow more than a student can. It is important to remember that this type of loan must be repaid by the parent, if the student fails to do so.