Hank Coleman

The federal government only offers a limited amount of financial aid for college students each year. Whether your family is over the income limit or you’ve maxed out your federal loans and need more funding to pay for your educational expenses, then you might need to turn to private student loans for help.

Maintaining your financial health is important, which is why many people are wary of the potential pitfalls of private student loans. However, they could be useful compared to your alternative options of finding outside funding for your education or having to transfer to another university to lower your tuition costs.

Should You Borrow Private Student Loans?

Here are a few considerations to make if you might take out private student loans:

Available Funding

Private student loans offer much larger loan packages than what you might qualify for from governmental sources of financial aid. You can typically borrow up to $21,000 in loans from the federal government (subsidized or unsubsidized, depending on your qualifications and type of degree you’re pursuing). You can put this money towards tuition, books, and other living expenses during college.

While you can typically borrow much more from private student loan companies, be sure to take out only what you need to avoid having to repay six-figure student loan balances like you hear about in student loan horror stories.

Credit Checks

Some federal financial aid is based on need, which means you might not experience a credit check prior to loan distribution. However, private student loans are credit-based, so many companies will require a credit check to ensure you’ll be able to manage the loans and eventually pay them off. Research shows that people with lower than a 650 credit score may struggle to qualify for private loans, which means you’ll need a co-signer to be eligible for the loan you’re applying for.

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Getting a loan can sometimes be a lifesaver. Nearly everyone at some time needs to make a purchase which will make a difference to life. There was a time when it involved a visit to the bank to persuade a reluctant manager, but now it is often a simple matter of completing an online form and the loan can be agreed within seconds. Unless that is, you have a poor credit score report, in which case the process can be frustrating and disappointing.

How to Get a Personal Loan with Bad Credit

So what are your options if this applies to you?

Is Your Score as Bad as You Think?

Before you start to look for a loan, check your credit report score. You will need to do this with each of the credit report agencies. It is not unusual for people to find mistakes, like a debt which you settled still listed as outstanding. On the whole, it is relatively easy to get such mistakes put right by contacting the lender and getting them to correct the administrative error.

Improve Your Score

It is a fairly long-term process, but it is always worth setting things going to improve your score, by paying off as much debt as you can when you can. The lower the percentage of debt to your income or borrowing limit, the better things will be. Be ruthless with cutting your expenses.

At the same time, of course, you must avoid making your score any worse. For instance, if you are having difficulty meeting your car loan payments on time, you could research car loan refinance options to spread the payments—it will cost more in the long-term, but it may avoid missed payments.

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