What Lenders Look for in a Private Student Loan Applicant

Student loan lenders are looking for candidates who they can reasonably assume will repay their debts on time. This is a hard thing to determine with a young person, who usually does not have established credit. Those lenders, therefore, have to use means other than a credit score to try and guess which students are the most qualified for loans. 

Previous Work & Financial History 

Students entering college typically have limited work experience, if any. However, if a future student does have a record of holding down a job and paying taxes, this will go a long way on a loan application.

The same is true if the student has managed a credit card or car loan previously, even if there was a co-signor. It is best for applicants to have managed credit independently, but any proof of prior credit will help prove the person's ability to make payments. 

Vocational Course of Study

Lenders prefer to provide finances to those students who are going to pay off their loan debts immediately rather than defer payments. If a person is going into a vocational field, such as engineering, finance, education or architecture, there is a better chance that student intends on working immediately following college. More general liberal arts or arts degrees, such as history, philosophy or sculpture, tend to lead to graduate studies.

Presence of a Co-Signor

Student loan qualifications do not stipulate a co-signor in all cases, but it can be helpful to process the application. If this is the first loan you are seeking, you may not be able to secure it without the signature of another party. You will have a challenging time, also, because you do not likely have a current salary.

The most important factor, to a lender, when applying for a loan, is the ability to pay the loan back. However, most students cannot demonstrate ability, until after graduation. In the absence of a job, a co-signor is the next best thing a lender will consider. Using a co-signor will not contribute as much to your healthy credit in the future. However, you will likely have a job in the future, meaning you will have an easier time getting loans. 

Ability to Work during School

Some students pursue a work-study option as a way to repay student loans even before school is finished. Depending on the total loan amount you are seeking, a part-time salary can significantly reduce your principal in the two or four years your attend school. Likewise, if you intend on working during breaks and over summer session, you can pay off a portion of the debt before graduation. Provide this information to your potential lender and estimate how much you intend on paying each year. If you have any savings from previous jobs, any assets, or a trust fund that will mature at graduation, this information will also assist lenders in seeing your ability to pay off a loan.

 


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