Many students have to turn to private loans after maxing out their Federal Stafford Loans. But you may find it very difficult to get private loans these days. Most of the lenders have stopped or suspended their student loan programs and more will follow suit as federal subsidies to private lenders are withdrawn from June 30. You can now get a private student loan only if you take some active steps towards improving your eligibility.
Improve your credit score
One of the most important factors considered by private lenders when giving a student loan is the credit score of the applicant. Having a good credit score will considerably improve your chances, as other applicants are also young adults who will very rarely have a good credit history.
Another advantage of having a good credit score is that you will be able to get lower interest rates. You can start working on your score by getting a free credit report. You are legally entitled to three free credit reports every year, one from each of the three major credit reporting agencies – Experian, Equifax and TransUnion.
Look for any mistakes in the reports and get them rectified. Also see what you can do to improve your score, such as reducing your credit card debt.
Find a co-signer
If you are a freshman or a sophomore, then you will probably need a co-signer. It is only in the later years, when most students have an established credit history, that lenders consider giving them loans independently. You can approach your parents, family members and even close friends to act as a co-signer. It will help your cause if you can find someone with a healthy credit record.
Look for established lenders
Finding a lender for a student loan is a big challenge. You should approach those banks and institutions with which you have an existing relationship. If you have done business with them earlier, then they will be familiar with your track record and it will be easier to get a good deal. You can also look for an established lender on your school’s preferred lenders list or your local community banks.
Another alternative is to go for peer-to-peer lending sites, which may offer a convenient loan arrangement without a lot of paperwork. But these sites might not be able to help if the loan amount that you are seeking is large.