Category: Student Loans

Different Types of Poor Credit Student Loans

We’ve all heard the statistics about the effect more education will have on your income, but we’ve also heard the statistics about the rising cost of a college education. People with great credit dive right into school because they feel like borrowing money to pay for it won’t be a problem. But what about prospective students with bad credit? Not to worry – you can count on poor credit student loans to get you through your education. But first you need to educate yourself on what types of student loans are available to poor credit borrowers.

The first kind, and best kind, of student loans, are those backed by the federal government. Stafford loans and Perkins loans are not granted based on your credit score or history as a borrower. The government backs these loans so lenders will give you money you need for school without taking a good look – at all – at your ability to repay it. The understand the statistics and recognize that on average people will repay those loans once they graduate. So not only are the Stafford and Perkins programs great student loans for poor credit borrowers, they’re also very low interest.

There are two different kinds of Stafford loans: you have the unsubsidized version and the subsidized version.

Subsidized Stafford loans are given to students who meet the government’s qualifications to declared ‘needy.’  These loans are great because the government pays all the interest on the loans, for the entire time you’re in school. Once you graduate you’ll still have a six month grace period before your payments on the loans become due and you become responsible for the interest as well.

Unsubsidized Stafford loans have only one difference – the government doesn’t pay the interest on the loans while you’re a full-time student. But that doesn’t mean you have to pay it. It just means that while you’re in school the interest accrues and once you reach the end of your grace period you’ll be responsible to pay back the principle on the loan as well as the interest that accrued before you graduated.

Perkins loans are less common, mostly because most people aren’t in enough financial hardship to qualify.

Stafford loans and Perkins loans are obviously the best choice, but if you have to rely 100% on loans to get yourself through school, these loans aren’t likely to be enough. You’ll have to look to alternative borrowing sources, and that may mean seeking out private poor credit student loans.

This can be risky though. Private student loans with bad credit have none of the same perks as the government supported loan programs. The interest rates can be brutal, and you aren’t likely to find consolidation programs that compare in any way to those that go with the government loans. Many students take on private loans not realizing that they’re locking themselves into payments and interest rates that could either make their credit worse or push them into careers that don’t interest them at all because they need the higher salary.

If after evaluating your financial needs to get through school you realize that government subsidized loans won’t be enough, I’d strongly encourage you to delay the education for a short time and work toward saving enough money to get through school without private student loans with poor credit.

Are No Credit Check Student Loans Real? Yes and No.

It’s basically common knowledge that you have two types of student loans: federal and private. What’s less commonly known is that the only student loans with no credit check are the federal variety. Every private student loan provider is going to check your credit, every time.

A no credit check student loan starts with the FAFSA, which stands for Free Application for Federal Student Aid.  FAFSA is also the doorway to many other financial aid programs, but those are topics for another article. The most common next step after you’ve filled out your FAFSA is to get some kind of Stafford loan, the most common subsidized federal student loan. Because you’re dealing with the government’s program here, there will be no credit check. They use other criteria to decide whether you qualify, including factors such as your own income and the income of your parents or other sources of financial support. The government feels strongly enough about education that they’re willing to back loans made to students who have essentially no business borrowing the money.

On the other hand you have private student loans, where there will be a credit check, and if you should happen to qualify you’re likely to borrow much more money than you really need, at higher rates than you would ever want to pay, with no real opportunity for a loan consolidation after you graduate – at least not one that compares to student loan consolidation programs for federal loans.

So, not only is it more appealing to go with no credit check student loans – it’s also the right move financially in the short term and the long term.

Consolidating Private Student Loans

Every graduating college senior with any educational debt should know that consolidating their student loans is going to be one of the most important things they do after they leave school. No matter how small your student loans are you’ll find a major difference in your total repayment amount if you use a consolidation program to lower your long term interest rate even a couple of percentage points.

What many college seniors may not know is that there’s a big difference between consolidating private student loans and consolidating federal student loans. With federal student loans you’re guaranteed certain benefits by law – things like a fixed and unchanging interest rate, no fees, and an automatic rate reduction if you complete your consolidation during the six month grace period that starts when your full-time student status ends. Private student loans don’t carry any of these guarantees, and that makes them less appealing, which means they’ll have to work harder to convince you to give them your business.

Unfortunately, some private student loan consolidation companies resort to less than ethical marketing practices to get you to hurry up and complete their process. Here are some things to watch out for:

  • direct mail pieces and/or websites that use very official looking seals and logos in an attempt to look like an official branch of the government
  • gift cards or other bonus incentives designed to entice you to work with a company without having first checked out their credentials and without fully assessing the quality of their consolidation loans
  • telemarketers or direct mail pieces that ask for personal information such as your student ID, your social security number, etc in order to ‘pre-qualify’ you. Never give out any such information without knowing very well the trustworthiness of the company you’re communicating with.

There are plenty of legitimate and credible business out there who can help you consolidate private student loans, but you need to be willing to go through a couple of months of due diligence to make sure you’re working with the best one for you. Investigate them thoroughly, and don’t forget to use resources like the Better Business Bureau, and the Consumer Protection Agency in your research.

Low Interest Student Loans

A college education is already expensive, and it’s getting more costly every day. You could easily spend $10,000 per year for a bachellor’s degree at a school in your home state. I don’t know what the exact statistics are, but I’d be shocked if less than 50% of college grads make it out of school with no education related debt. Low interest student loans are a crucial part of most people’s college experience.

Do you know how to qualify for a low interest rate student loan? Would it surprise you to hear that most education loans come with low rates? I guess that requires a little more explanation.

With student loans you’re first discussion is always going to be about ‘subsidized’ versus ‘unsubsidized.’ A subsidized loan involves the government’s stafford loan program. What happens is you borrow the money you need, and the government takes care of the interest that would normall accrue on that loan. The idea is they don’t want you to be burdened with growing interest balancese while you’re in school and your ability to earn is limited by the fact that you’re in class all day and studying at night. With subsidized loans you’re not going to see any interest accrue until six months after you end your status as a full time student.

On the other hand you have unsubsidized student loans. These do start accruing interest from the day they’re disbursed, which makes them a little more costly. Although they interest does start to accumulate, you still won’t be required to make any payments until you’re six months removed from your ful time student status.

You also have private student loans. Once you’ve borrowed the maximum authorized by your school, you might need to apply with private lenders if your education costs still aren’t covered. These are going to be the highest interest loans you’ll get during school.

Now, what you need to understand as you approach the financing of your education is that the ‘low interest’ doesn’t really come into effect until you go through the loan consolidation process after graduation. Once you leave school, and as the time that your payments will begin nears, you’re going to get massive amounts of mail from consolidation companies who want to combine all your loans into one balance with one payment, at one low interest rate. This is the smartest move you can make.

Going through the consolidation process is going to secure a very low rate for you, making your payments as manageable as possible as you begin your professional life.

Consolidate Private Student Loans

The time just before and just after college graduation is chaotic to say the least. You’re making plans for graduation, double-checking your transcripts, polishing your resume, interviewing for jobs (hopefully), and looking forward to starting your life as a full-fledged grownup. But along the way, don’t forget to consolidate your private student loans. It’s one of the most important financial moves you’ll make as you start your professional life.

I remember when I went through this process – without the consolidation my interest rate was going to be something like 6%. After consolidating my private student loans was around 2%. Let’s do the math. If  you graduate with $20,000 in loans, your situation could look like this without consolidating:

$20,000 to be repaid over 10 years with 6% interest creates a monthly payment of around $222. By the time you pay off the loan you’ll end up having paid over $6,600 in interest on your education.

The same loan balance and repayment period with a 2% yields a payment of around $184 and costs you only just over $2,000 in interest over the life of the loan.

Now, if you took the extra $38 per month and saved it at 5% interest during that same ten years, you’d end up with over $5,700 in savings. So you save $4,600 in interest and you get to have an extra $5,700 in a savings account. That’s a swing in your favor of over $10,000. Are you starting to understand why it’s so important to consolidate your private student loans?

Here’s how it will work. Your loan payments aren’t going to be due until six months after you’re no longer a full time student (hopefully that means six months after graduation, right?). During those six months you’re going to get plenty of offers in the mail offering you great deals on student loan consolidation loans. Do not accept the first one. In the age of the internet, take the time to research the companies that are contacting you. Check them out with the Better Business Bureau, and see if you can find any reviews on third party sites written by their current customers. You’re going to be married to these people for a long time, you want to make sure they’re above board and they’ll take care of you.

Also look for a consolidation company who will give you a further interest break if you set up your payments on your bank’s bill payer. Not only will that save you some interest, it will protect you from messing up your interest rate and your credit by making payments late or not at all.

Now, go enjoy adulthood! You’ve worked hard to graduate and get where you are, now keep progressing and enjoy your life.

Student Loans with No Credit History Required

I clearly remember sittting in a classroom in college with ten or fifteen other students and a financial aid staffer on the day my first student loan was disbursed. For 30 or 45 minutes he talked to us about how we really should minimize our loan amounts, only borrow what we absolutely need, etc. I remember being a little nervous; I guess that was the goal they were trying to accomplish. I received about $2,500 that day, and true to the financial aid guy’s prediction, I ended up taking about $13,000 more in student loans before I left school a few years later. I guess that’s the risk of student loans with no credit history required.

The reality is student loans rarely require you to have much credit history. Schools and lenders know that the average 18 or 19 year old kid, fresh out of high school, isn’t going to have much of a past as far as credit is concerned. I can’t even remember if they checked my credit when I got my loans. I’m sure they did, but my guess is these schools are running credit checks more to see if you’ve done anything horribly wrong than to see what you’ve done right. As long as you don’t have any major disasters on yoru credit report they’re probably going to give you at least some student loans with no credit.

Your problem will come if you need to borrow a lot more than would be normally available through standard Stafford loan programs offered through universities. If you need to go way above and beyond those amounts, I’d advise taking a step back. Have you heard all the stories on the news about college grads moving back in with mom and dad because the job they get out of school isn’t enough to cover their cost of living and their loan payments?

Nothing seems more ridiculous than a person majoring in something like literature or politicial science and then going deep in debt when they’re only real career aspirations are to work for a non-profit. Some common sense needs to come into play here. Do some research on how much your loan payments will be for a given amount of debt, and then decided whether your expected salary will go as far as you need it to. And by the way, be reasonable about your ‘expected salary.’ It’s better to be conservative when you’re using that estimate to decide how much debt you should take on.

The more I think about it, the more I’m wondering whether student loans with no credit check are a really a good idea.

Paying Back Student Loans

It’s funny…when we were all in school, sitting in class, stressing over tests, hanging on the weekends…we racked up all that student loan debt thinking “it’s no big deal, my first job will pay well and I’ll have these loans taken care of within a year or two.” For some of us that ended up being true, but for others it didn’t quite work out that way. But let’s not think about the negative side of things. You’re out of school now, you’re working (let’s hope) and you’ve got to pay back student loans for the next ten to fifteen years.

That is unless you get on some kind of accelerated debt repayment program. Well, actually let’s back up one step. Hopefully when you got out of school your first step was to go through the proper student loan consolidation process that got your interest rate down to 2 to 3%. I think the interest rate on my loans is somewhere in the neighborhood of 2%, and my monthly payment is about $97 on total loans of around $15,000.  I’m not crazy about that debt, but my $97 payment isn’t exactly crushing me.

So once you’ve consolidated, what’s the fastest and best way to get those loans paid down?

Maybe the first question we should be asking is whether it paying down student loans more quickly even makes sense. Think about it – if you do in fact have yourself locked in at an interest rate of 2% or lower, it’s likely that you could earn more than 2% on a savings account. In other words, you’re earning more interest than you’re paying. As long as that’s true? Why lose money by paying back your student loans more quickly?

There are a couple of schools of thought here. On the one side you have the hard core believers in ‘leverage.’ In other words, why would you pay off your loans early when you’re earning more interest than you’re paying, as we just discussed. On the other side you have the debt-haters who say that people who believe in leverage are usually just people who live their lives buried in monthly payments and losing sleep as they stress over those payments.

Five years ago, I was in group one. Five years later, I’m much more in group two. I hate monthly payments with a passion. They do nothing but stress you out and rob you of your peace of mind and creativity. I’ve never met a person who regretted being completely debt free, but I’ve met plenty of people who wish they had no debt. Pretty simple, right? I guess my point is that you should set up a system that disciplines you and gives you help paying back student loans early. You might have to sacrifice some extra money for a few years, but when you’re payment free you’ll feel like the smartest person in the world.