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If you are a student, you will likely need a loan of some sort to continue your education. Whether it’s a smaller or a larger amount, there are various aspects of a student loan of which you should be aware, even before you begin selecting and applying for loans. Keep in mind that your credit score may have an impact on the type of loan you might secure. Throughout the process, it is important to stay informed and be aware of any potential financial impact a loan may have on your current or future credit rating. Examine the Various Student Loans The first step for many people is to simply examine student loans that are currently available. There are several different types of student loans, each of which is designed to maximize the type and amount of aid you will receive while keeping the amount that you will need to repay later to a minimum. There are several types of loans, including Stafford, Perkins, PLUS, institutional, as well as private and state loans. A Stafford loan can be subsidized or unsubsidized, and is generally the most popular of the federal education loans students receive. Perkins loans are low-interest federal loans that are generally provided by the school for students with anomalous financial needs. PLUS loans typically offer coverage that other loans do not, and are useful for dependent students’ parents or for graduate students. Institutional loans comprise non-federal aid that is offered to students from their schools. Private and state loans do not constitute federal aid, but they are useful for students who are either ineligible for financial aid or who need to cover costs that other types of aid do not. Check Your Credit History One of the first steps when applying for a student loan is to check your credit report. A credit report is a detailed history that lets potential lenders know how financially responsible you have been in previous years. This report will allow the lender to decide whether or not it will be risky to provide you with a loan. When lenders do a credit check, they will have access to your credit report (which includes your entire credit history) and your credit score. This credit history includes past and current credit card accounts and any instances where a debt was passed along to a collection agency. This report will also note any time a potential lender has requested your credit report. Various past financial issues may show up on your credit report, including judgments, bankruptcies, liens, and foreclosures. It is wise to stay informed and up to date on your credit history. It is also important to know your credit score and, especially, to understand the importance of staying within a good credit score range. The overall credit score number will have an impact on the type of loan for which you may be eligible, but there are other aspects to consider. For example, some students simply may not have had a chance to build a credit history, which may automatically result in a low credit score. In general, credit scores range from approximately 300 to 850. The higher your score is, the better your credit rating. Keep in mind that your credit score will change as you gain a financial history. For some people, this means an increase in their credit score over time. Others, who may be experiencing financial difficulties, may see a decrease in their score. Will You Need a Cosigner? As noted earlier, many students may not have built up a sufficient credit history and might, therefore, have a low or relatively low credit score. In such cases, the question of whether you are able to get a student loan without a cosigner usually arises. For some students, having a cosigner makes the difference as to whether they are successful in securing a loan. A cosigner is essentially someone who signs for the student loan as well, assuring the lender that any student debt will be repaid even if the student is unable to fully repay his or her loan. However, there are some students who may not have a cosigner or a high enough credit score to secure a loan. Fortunately, there are ways for these students to obtain a loan. In this instance, the first step is to attempt to increase private loan eligibility through raising an existing credit score. This may be done by, first checking to see if the score is below 650, as this is generally the cutoff point for obtaining a loan. If the credit score is under 650, then paying off any debt, and checking the report for inaccuracies are good places to start. Some students can also try to apply for financial aid, which generally includes receiving a scholarship. If you are a student, you are likely trying to figure out whether you need a student loan, and how to obtain one. The process varies, depending on factors such as your credit score and whether you have a cosigner. Some students may have a low score and no cosigner, but there may still be ways to obtain a loan. Joy Mali is an active finance blogger who is fond of sharing interesting finance management tips to encourage people to manage their personal finances. More specifically, she advocates that people should check credit reports and scores regularly.
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