3 Tips to Get Guaranteed Private Student Loans with Bad Credit

Guaranteed private student loans are less expensive than loans without a guaranty. A guaranty is simply a promise from another organization, typically the federal government, to purchase the loan from a lender if you default. Most loan guarantees are given to creditworthy applicants only. However, if you have bad credit, there are a few options that may still make you eligible for a guaranty, despite your poor financial record.

#1 Provide Written Explanation

Whenever you have bad credit, it is important to point to a specific cause of that negative report. Simply mismanaging your finances will not be a good reason for a future lender to trust you. Alternately, if you have had an illness or emergency, a lender may be sympathetic to the causes of missed payments in the past. For many students, the cause of low credit is a short credit history instead of missed payments. You can explain these circumstances to a lender with a short written explanation. Submitting this along with your loan application will show a lender you are aware of the issue and have taken steps to correct it. Above all, the lender wants to see you are no longer under the pressures that caused you to previously miss payments on your credit history. Once a private lender accepts your loan, then you can submit the same documents to a service that will guaranty your loan.

#2 Seek Need Based Loans

The federal government does give need based loans to students who are economically disadvantaged. Even with these loans, though, the borrower should show he or she is creditworthy. Since the loans are going to needy people, the government may be more understanding of issues that result from economic disadvantages. Be sure to highlight your disadvantages in your application. You can have a private loan guaranteed by the government based on your need, just as easily as your credit score.

#3 Use Collateral, Cosigners and Other Options

The basic criteria for any loan guaranty are that you are able to locate a private lender to fund your loan. In order to do so with bad credit, you may need to get creative with your loan application. Using collateral, like a savings account or hard asset, may provide a lender more confidence in your ability to pay the loan. You can also borrow the good credit of a close associate or relative by using him or her as a cosigner. Again, you will need to apply separately for the loan guaranty and meet the qualifications of the guaranteeing institution. However, the same rules generally apply here as do with a private loan: provide assurance against default and credit becomes less important.

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