September 27, 2019 By College Ave Student Loans
How Do You Qualify for Private Student Loans?
Many college students are concerned with covering the cost of school on their own. While scholarships, grants, and federal loans may pay for the bulk of your college expenses, private student loans are an option for covering any remaining expenses. You may not yet understand all the differences between federal loans and private loans, but the qualification process is one important distinction. If you’re starting to wonder how you qualify for private student loans, you need to know what makes the application process unique.
Federal and private student loans come from different sources. The government funds federal loans, and you can only get them by submitting the FAFSA (Free Application for Federal Student Aid). Alternatively, private loans come from banks, credit unions, and online lenders like College Ave. Private lenders do not require you to fill out the FAFSA, but they require you fill out their own online applications. By checking your credit history and income, they can verify your creditworthiness and determine if you need a cosigner. Private lenders may use additional factors to help determine your eligibility. Use the list below to learn how you qualify for private student loans.
Adding a cosigner to your student loan agreement means that both you and the cosigner are equally responsible for repayment of the loan. Cosigners are typically parents, guardians, or another trusted family member. Most private loans require a cosigner because typically college students don’t have the credit history and income requirements needed to secure a loan on their own. In that case, the lender will require a cosigner who does meet the specific loan eligibility requirements. At College Ave, 96% of undergraduate students have someone cosign on their loan.
Read More on How to Find a Cosigner
For most lenders, applicants and their cosigners must have a Social Security number and be a U.S. citizen or permanent resident. If you are an international student, you may still be able to qualify for a student loan with a cosigner who is a U.S. citizen. Check with the individual lender to verify their requirements.
In order to receive a private loan, you must be enrolled or accepted to an accredited school. Many loan providers require at least half-time enrollment. Since lenders will likely send the money directly to your school to cover tuition and other costs, they will also check that you are borrowing the appropriate amount. That’s a good thing—you won’t want to borrow more than you actually need.
Perhaps the most crucial aspect of qualifying for a student loan is your credit. This will determine if you are eligible for the loan on your own or if you’ll need a cosigner.
What is a Credit Score?
A credit score is a three-digit number that summarizes your credit history and your ability to pay back debts. FICO scores range from 300 (worst) to 850 (best). According to Credit Karma, the average credit score for people between the ages of 18 and 24 was 630. The average credit score for people between the ages of 25 and 34 was slightly lower at 628.
Other criteria private lenders will evaluate include your income and your debt-to-income ratio. You and your cosigner may need to submit pay stubs that demonstrate a proof of income. This gives lenders an idea of your ability to repay the loan. Other financial red flags they look out for may include delinquent payments on other loans or bankruptcies. Knowing your income and financial history will help the lender determine what terms are reasonable for your loan.
After the lender has evaluated your eligibility, you will receive one of three results: Approved, denied, or eligible with a cosigner. Remember that all private student loan lenders are different, and your results from one may be different from another. Creditors want to make sure you are well suited for the loan you need, so pay careful attention to your results and why you may have received a specific result. If you aren’t sure how “creditworthy” you are, you can use simple online tools that help pre-determine what you qualify for and whether you’ll need a cosigner at all.
Pre-Qualify and Apply for Student Loans
Applying for new loans has some consequences. When you apply for a new loan, the lender will request information about your credit score and history. This type of “hard inquiry” from a third party may negatively affect your credit score, depending on the issuer and the timing of credit inquiries. Keep this in mind if you are applying for multiple loans, credit cards, or other forms of credit; applying for the same type of loan with multiple lenders over a short period of time may be viewed as comparison shopping, and therefore, not impact your credit score as much as applying with multiple lenders over several months.
When you check your own credit score, this is considered a “soft inquiry”. Pre-qualification checks are also “soft inquiries,” which have no impact to your credit score. That’s another reason most students choose to pre-qualify before deciding on their lender. We offer a free pre-qualification tool to help you see if you or your cosigner’s credit scores qualify, and what interest rates you can personally expect before you apply. By submitting basic information, College Ave initiates a soft inquiry within seconds. There are no negative effects, so try it out!
If you know you meet all the qualifications above and you’re ready to apply for a private student loan, you can apply online with College Ave today. Our student loan application takes just three minutes.
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