The cost of education has escalated to mammoth proportions in the last decade, there are so many expenses involved that even some scholarships don’t cover entirely – tuition fees, dormitory fees, cost of books, lab fees, computers, and living expenses. A student who suffers from bad credit or has no credit to speak of doesn’t have too many options. Bad credit student loans provide a way to secure some funding to finance the education costs. Finding the right lenders who specialize in student loans for poor credit is all about knowing where to look.
Federal Government Loans
Understanding students plight the federal government has designed several loan packages to reduce students’ financial burden and help them get by until they graduate.
In order to obtain the federal loans students can start by filling a FAFSA application. FAFSA is an online process which stands for Free Application for Federal Student Aid.
There are a few different types of loans given by the federal government:
The Stafford loan is granted directly to the students. The interest rates are less than 8.25% and the student can begin their repayment six months after they complete their studies. That way they have enough time to secure a job so that are able to start repaying the loan. The Stafford loan could be in subsidized form in which case the government pays the interest during the deferred period, or in an unsubsidized form in which case the student has to pay the interest amount during the deferred period.
The PLUS loan, which stands for Parent Loans for Undergraduate Students, is given to parents on behalf of their children. Sometimes a co-signer may be required if the parents are not eligible for the loan.
The Perkins loan is funded jointly by the college and the government and the repayment has to be made to the college. The interest rates are about 5%.
The Pell Grant is a loan that if you qualify does not necessitate repayment.
Generally grants from the federal government are for smaller amounts and they may not be sufficient for covering everything you might need. In this case, for a larger loan you may need to turn to a bank. The interest rates may be high depending on whether you can offer collateral or not.
Credit unions are generally very helpful and try to meet your needs with a suitable loan.
Private lenders are your next best bet. There are a number of lenders available online and the application procedure is simple and quick. Private lenders generally carry high rates of interest especially if there is no collateral involved. However, you are given the option of deferred payment. If you want to reduce the interest rates on offer, you could look for co-signers which would reduce the interest considerably.
Once you have graduated it would be a good idea to go in for a student loan consolidation program for converting student loans to a single amount where you pay smaller interest rates, which you may now qualify for as in time you may have already increased your credit score.