How to Get Low Interest Student Loans with Bad Credit

Low interest student loans may not be available to bad credit borrowers who are not high need individuals. However, if you qualify based on your need, meaning you are low income as well as low credit, then you may be able to secure a low interest loan through public financing options. The loans are offered by the federal, state or local government and may also be available as grants through your college.

Low Credit Borrowers

Most students have less than perfect credit. This is owing to a combination of factors. First, students have a short credit history, meaning they have not taken many loans in their life. Second, students have no income, which automatically makes their debt to income ratio unfavorable. Most lenders offering student loans expect these problems, and you may qualify for a low credit loan if these are the only reasons for your bad credit score. On the other hand, if you have bad credit because you have faltered on previous loans, then you may need to seek alternative sources.

High Need Borrowers

High need borrowers are those students who come from economically disadvantaged situations. Students from low-income families are the most obvious high need borrowers. Even so, there are also high need borrowers from high-income families who are not getting assistance in order to pay for college. If either of these circumstances applies to you, then you may be eligible for low interest financing based on need instead of your ability to pay. All borrowers seeking loans will be judged based on their credit, but your high need may help to counteract some of the negative effects of your bad credit score.

Government Loan Programs

The most obvious place to look for low interest student loans if you have less than ideal financial prowess is the government. The federal government offers a number of subsidized loan programs to high need students at very low rates. There are also unsubsidized loans for students who are less needy but still seek affordable financing. The federal government is not the only public loan source, though. You may find a number of scholarship and grant options within your community to reduce the cost of financing college. For example, look to independent loan programs provided through your community bank. Community banks may have targeted programs for students who plan to reinvest in the community after college, perhaps committing to some public service ahead of time.

School Grants

Your college or university will have a financial aid office. Here, you can learn about grants to students who participate in particular programs or qualify based on need. You may also learn there are certain lenders your school can recommend to assist you in gaining a low interest loan. These lenders work with the school to arrange certain guaranty programs or financing deals. You may also opt for a work-study program. With this option, you will work at a campus job while attending school. This allows you to make loan payments immediately, instead of deferring payments, which will reduce your interest rate.

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