College Loans With A Bad Credit History And Without A Cosigner Can Be Expensive

Should you have no credit history or a poor or bad credit score then obtaining a student loan may not be so simple. However, if you can find somebody suitable to agree to be a cosigner and guarantee your loan repayment then this will certainly help you to get a loan.

Students usually have few if any credit cards, no not have car loans and seldom have a home loan which means that they simply have little or no credit history against which to judge the risks in granted them a loan. In addition, where students have a credit history it is all too often relatively poor because, as with a lot of us when we are young, they have made some foolish decisions and overstretched themselves with the result that they ran into problems making their repayments.

Either way the absence of any credit history or problems with late repayments and perhaps defaulting on loans will frequently put a student into a high risk category so far as many lenders are concerned. As a consequence loan officers, including those making decision on behalf of the government's Federal student loans programs, will often process applications from students in this situation with care. In many cases loan applications will be turned down or, in borderline cases, loans may be granted but a higher interest rate will be applied to offset the risk and as compensation for increased default rates.

One method of counteracting the absence of any credit history or a bad credit record is for students to use a cosigner for their loan application. In many cases this will be a parent and loan officers will look then at the credit history of the parent when deciding whether or not to grant a loan.

It is also the parent's credit history becomes the principal factor in determining the interest rate for the loan and people with a superior history will typically receive the best rates, while people with lower credit scores will usually pay a higher rate. This difference might seem to be small at first sight but can in reality add up to a significant sum over the normal loan repayment period of 10 years.

For example, one popular loan program grants loans at 4% for borrowers with a superior credit score increasing to 6% for people with a poorer but nonetheless adequate record. This 2% variation may not seem like much but could amount to more than $5,000 over the life of a normal loan.

It is not uncommon nowadays for students to require as much as $100,000 to fund an undergraduate education and, even where interest is paid from the start and is not accumulated, interest at the Stafford loan rate of 6.8% is in the region of $567 every month or $6,600 per year. Lowering the interest rate to 5%, which is the present rate for a Perkins loan, reduces these figures to $417 and $4,820.

It should also be remembered that these numbers assume that repayment begins immediately. However, it is far more usual for repayment to be deferred until six months after leaving college which is going to increase these numbers significantly.

Borrowers with a cosigner who has a superior credit record will not only improve their chances of being granted a loan in the first place, but they will also lower their total loan repayment greatly.

TheStudentLoansCenter.com provides information on a range of topics including guaranteed student loans without a co-signer and no credit check alternative student loans