It is often thought that a student can kiss goodbye to any chance of a loan if they have no-one to act as a cosigner in the application. But this is not actually true. Millions of students manage to secure approval on student loans without a cosigner, and to finance another year or semester on campus.
What is true is that the amount available through cosigner-free student loans is limited – usually not more than $15,000. But this is at least a figure that can greatly ease the financial pressure they find themselves under.
What is important to consider, however, is that in order to get loan approval for students with bad credit, but without the benefit of a cosigner, some compromises may have to be made, not least in the form of higher interest rates.
Why a Cosigner is Preferred
It might seem strange that getting student loans without a cosigner should make such a big difference, but there are real reasons why cosigners are preferred by lenders. A cosigner included in a loan application guarantees that the monthly loan repayments will be made, even if the borrower is unable to make the repayment.
In essence, a cosigner can be considered human collateral, in that they provide the kind of security that lenders love to have. So, in the case of cosigner-free student loans, some serious issues will be more readily examined by lenders before giving approval.
However, it is essential that a cosigner meets the expected high standards before any hope of loan approval for students with bad credit can be harbored. The cosigner must have an excellent credit history and a large enough income to cover the repayments if it ever becomes necessary.
What to Expect
It is unrealistic to believe that any student loan without a cosigner required is going to be large enough to deal with all of the expenses incurred by being in college. Between tuition fees and living expenses, the cost of college is typically in the tens of thousands of dollars each year. In fact, fees alone can be as much as $50,000 per year, though that does depend on the college.
A cosigner-free student loan, however, is likely to start at around $2,000 and extend no further than $15,000. That kind of range is usually enough to handle living expenses, like rent, food and utility bills. It might also be enough to meet tuition fees but is unlikely to cover any more than part fees.
Crucially, however, without any cosigner to guarantee the loan, the interest rates will be higher so monthly repayments will be bigger. In order to get loan approval for students with bad credit, it is therefore necessary to choose a lender very carefully.
Ideal Lenders are Online
Thankfully, the task of finding a suitable lender is made all the easier by the internet. Generally speaking, student loans without a cosigner will be expensive. Online lenders, however, are known to offer lower rates of interest, and better terms.
In fact, cosigner-free student loans are common because many loans require no credit check. So a low credit score has no influence on an application. The repayment schedule is also a matter of negotiation, and often loan approval for students with bad credit comes with a delayed schedule. This means that repayments are not expected to begin until after graduation.
Of course, in issuing student loans without a cosigner, the lender is accepting a higher degree of risk, so interest rates will be slightly higher than normal. But with only the interest (or perhaps even nothing) to pay until graduation, the pressure is off in the short-term.