Student bank loans are often necessary to get an education because federal student loans come short. Federal loans are a good start; payment doesn’t start until the student finishes school, the rate is fixed, and there are no credit requirements, but they usually don’t cover all of a student’s needs.
As education costs rise beyond what federal loans provide, financial institutions make a business of investing in a student’s education. They need the money to finish school and succeed in life, and student loans are almost impossible to dismiss by declaring bankruptcy, so this investment can be quite profitable.
Banks are willing to compete to get these students to borrow from them. If you have a good credit rating and/or a cosigner with outstanding credit, you can get Prime interest rates, or even lower, or banks which use the LIBOR (London Interbank Offer Rate) index to determine their interest rates can offer you the equivalent of Prime, and if current trends continue, LIBOR interest rates will probably end up being lower. A cosigner will be responsible for your debt if you don’t pay, so it has to be someone who trusts you, but if they have a good credit rating, you can get a good price on a loan even if you have no credit or bad credit.
Parents of students needing additional funding can apply for student loans in their name for their children. They can use a cosigner if they do not meet credit requirements.
Private student loans are also available for students with no credit or bad credit. They may have to work as well as study or they may have to settle for a higher interest rate and pay extra fees. This can lead to financial problems, especially if they don’t finish college, but if they do, it will have been worth it even paying a higher interest rate for a longer period of time.
Finishing college can justify certain extra risks, such as taking out higher-interest, shorter-term loans of other kinds to make up what student loans don’t cover. Students or parents can take an immediate financial burden as an investment towards a student’s education.
This can be disastrous if overused, but a student can cover certain day-to-day expenses and schoolbooks and supplies using a credit card. It can be helpful but should not be used as a source of significant funding or tuition.
If a parent or student owns collateral, they can put up property for the sake of the student’s education. They can use a home equity loan, for example, to cover college expenses. Student loans have the advantage of being payable after leaving school, but this can be a good way for parents to help their student children out.
Even if you have no credit or bad credit, student bank loans aren’t hard to find. Take the time to see what competing financial institutions can offer you before deciding.