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Private loans

Private Student Loans for Bad Credit 

Updated 09/12/2021

When it comes to paying for school, many people worry that having no credit or poor credit will affect their eligibility for private student loans.


But fear not — a thin credit profile doesn’t disqualify you from getting the private loans you need to fund your education.


While many private lenders require credit checks to determine your eligibility (and your interest rates), student loans aren’t out of reach for people with low credit scores or no existing credit profile. In fact, students with suboptimal credit have a few different options.


Apply with a cosigner


Most private lenders require credit checks, which may impact interest rates or qualification for students with poor credit or no credit. Luckily, having a cosigner with good credit can open many more options for private student loans.


Cosigners will need proof of steady income and a healthy credit score. They’ll be responsible for repayment of your student loan debt if you can’t pay, so make sure to compare offers from several lenders and choose the one that feels right for you.


Improve your credit and refinance


Credit can seem complicated, but there are a few easy ways to build good credit and save yourself money in the long run. If you build up your credit score, you can refinance your loans to lower your interest rate. Consider these tips:


  • Open a credit card. If you’re confident you can pay off the balance every month, opening a credit card will help you establish a line of credit and demonstrate your ability to use it responsibly.
  • Pay off current debt. If you’ve got credit card debt, try to pay it down or pay it off completely before applying for student loans or refinancing.
  • Become an authorized user on someone else’s card. If your parent or another trusted source with good credit can authorize you as a user on one of their cards, you’ll improve your credit score as they make on-time payments.
  • Ask your landlord to report your rent payments to credit bureaus. Landlords aren’t required to report this information, but credit bureaus will incorporate it into your score if the information is provided. If you consistently pay your rent on time, ask your landlord to reward your responsibility by helping you build good credit.

Things to consider when choosing a loan


Regardless of your credit profile, it’s important to do your research before you commit to a lender. Here are a few things to look for when you’re choosing a private student loan:


  • Interest rates. Generally speaking, the lower your credit score, the higher your interest rate. Having a cosigner will likely qualify you for lower rates, but if you’re on your own, you should assess whether a variable or fixed interest rate is best for you.
  • Repayment plans. Especially for loans with high interest rates, shorter repayment terms will allow you to pay off your loans faster and minimize the amount you pay overall. However, because timely payments will build your credit and help you qualify for loans with lower interest rates down the line, it’s important to find the right balance on monthly loan payments. You may want to choose the shortest possible repayment period that still leaves you with manageable monthly payments.
  • Cosigner release. If you took out a private student loan with a cosigner, you may want to take them off the loan when your credit has increased. Many lenders have policies that allow you to release your cosigner after you pass certain credit requirements, make a predetermined number of on-time payments, or show proof of income after graduation.