Private loans are a credit based student loan product used to cover educational costs once you have exhausted scholarships, grants, and federal student loans. Unfortunately, most college students, especially undergraduate students, don’t have enough income or credit history to qualify for a private loan on their own. Most students will need to apply with a credit-worthy co-signer in order to get approved for a private loan for school.
It’s always a good idea to understand your personal credit profile, and it’s also helpful if your private loan co-signer has established a positive credit history. You and your co-signer can always review your credit report for free (once per year) at www.annualcreditreport.com.
If you are interested in learning more about private loan credit, and building a positive credit record, check out our section on Credit for College Students.
If you are in need of a private loan to pay for college, here are some things that you can do to improve your chances of obtaining a private loan credit approval:
Although most college students don’t have a long-standing credit history, your credit will be reviewed. In order to secure a private loan credit approval, a lender will most likely want to see that you don’t have any bankruptcies or student loan defaults listed. If your credit history also shows a pattern of payment delinquencies, that might also raise a red flag for the lender.
Private loan credit decisions are often made based on the credit of the co-signer, since most students don’t have enough credit in which to base a credit decision. A co-signer can be any adult, such as a parent, friend, or relative, with a good credit history. Your co-signer will be responsible for the loan with you.
Before you apply for a private loan, make sure you discuss these basic private loan credit qualifications with your co-signer:
If your potential co-signer doesn’t meet these basic private loan credit criteria, you may need to find someone else.
Once you have applied for a loan, you will receive a private student loan credit decision. Your decision will likely fall into one of the following three categories:
If you received a private loan credit denial, you will likely be unable to proceed with the application process.
If you are in need of money for school, but you are having trouble obtaining a private student loan due to your credit or other qualifications, you’ll want to speak to your financial aid office. You can also research these types of financial aid:
You can also try obtaining a private student loan through another lender. You can obtain a list through your financial aid office.
As a student, when you apply for a private loan, your initial private loan credit decision will likely tell you that you need to obtain a co-signer in order to get approved. Once your co-signer applies and is approved, you will receive a private loan credit approval.
Once you receive a private loan credit approval, your lender should inform you of other financial terms, such as your private loan interest rate and origination fee.
If you are looking for more information on private student loan credit, or finding a co-signer, see the sections below: