Getting a lower interest rate can mean that you won’t have to pay quite as much in monthly loan payments and can save you money overall. With private student loans, monthly payment and overall repayment costs depend on the type of repayment plan the borrower selects.
While you can still try to apply for private student loans without a cosigner, keep in mind that you will need a solid credit history and good credit score (usually around 650 and higher) to qualify.
Lenders take into account a number of factors when evaluating your eligibility for a loan. Lenders need to be sure that you’ll be able to repay your loan in time, so they require that you have a steady income. If you’re unemployed or are just starting out at a low-paying job, you might need to boost your income by budgeting and saving money before you apply for a loan.
You also need to be able to show proof of income when you apply for a loan, so if you just graduated from college, or you’re otherwise unemployed, you might need to hold off on applying for a loan.
Your debt-to-income (DTI) ratio is also an important factor. This is calculated by dividing your total monthly debt by your total gross income. Because your DTI takes into account your monthly debt, paying down debts quickly can help lower your DTI.
You should also take a look at your repayment history before applying for a loan. If you have any dings in your credit history, paying down your existing debt and making sure that you always make on-time payments can help you improve your credit and improve your chances of being approved for a loan.
Building credit before you apply for a private student loan
Your credit score is one of the most important factors that lenders consider when you apply for a private student loan. In order to be approved, most lenders require you to have a good credit score and a clean credit history.
If you have a limited credit history or a low credit score, it’s best to try and build up your credit before applying for a loan.
Some of the easiest ways to begin building credit are to ask a parent to add you as an authorized user on one of their credit cards or to apply for a secured credit card yourself. Secured credit cards let you deposit a certain amount of money that you can then borrow against – similar to a debit card.
It’s also important to keep an eye on your credit. If you ever see any errors on your credit history, make sure to dispute them and get them removed from your report. payday loans Oregon If you’re careful about paying down your debt quickly and always making timely payments, your credit score will improve over time.
Student loans with a cosigner
Generally speaking, only private student loans require a cosigner in certain situations, while federal loans do not. If you have a limited credit history or have delinquent payments in your past, you will most likely need a cosigner.
Because your cosigner backs up the loan repayment on your behalf, you often receive easier loan approval and better interest rates compared to applying without a cosigner. The stronger the borrowing profile (i.e. higher credit and income) of your cosigner, the higher the likelihood that you will receive a lower interest rate.
If you’re considering cosigning a student loan for a child or relative, remember that cosigning a student can affect your credit.