Why Student Loans With Bad Credit Come With No Credit Checks
Students have low scores because most have no credit history. But, while compromises are necessary, the availability of student loans with bad credit, and with no credit checks, means getting student financing is no problem.
A student is recognized by lenders as being a special case. They have little in the way of income, but when they graduate have a huge potential to earn good salaries. But even without a credit background, lenders are willing to offer approval with no credit check, making it easier for students to secure the funding they need to pay college fees and living expenses.
But there are other factors that feature in this achievement, whether approval comes from private or public lenders. All students should take the time to find out which student loan source suits them best.
The Significance of Bad Credit
There are clear advantages to getting student loans with bad credit, despite the credit status of the student in question. The fact is that low credit scores are not enough to see an application rejected, but they do have an influence over other loan factors, such as the interest rate charged and the loan limit.
Simply put, the availability of loan approval with no credit check, has nothing to do with credit scores. Instead, it is because lenders can charge one fixed rate on all of the loans, so those with good repayment histories are charged the same rate as those with no history at all.
Of course, because all students have a poor credit rating, often ranging from a basement 400 to an average 600 for those with a few years good history, and because most student loans go to students with very low ratings, so most benefit by this system.
Key Factors to Consider
Despite the benefits that students can enjoy, compromises have to be made. Receiving a student loan with bad credit means that the lender has ignored the risk involved in lending to bad credit borrowers, and have left themselves exposed to defaulters. So, the interest rate is higher than normal.
Some lenders will charge extra fees to cover themselves. Lending to students requires a certain amount of understanding, which is why approval with no credit check is provided. However, loan repayments are often delayed until graduation too, though interest may have to be paid. A small fee might, therefore, be charged.
Also, if a complete period of grace is granted, where no payment is made until after graduation, the students will face the maximum debt from graduation day. Interest accumulates and the principal remains untouched. So, through their student loans, a huge debt is created that students must face before getting their careers off the ground.
Student Loan Sources
Not all lenders offer student loans with bad credit, with most traditional lenders preferring not to take on the risk. Online lenders are more open to the possibility, and tend to offer check-free financing on most of their loan products. Logically, it is easier to secure approval with no credit check from a private online lender than from a traditional one.
But public loan sources frequently offer students loans that do not require credit checks too. This is because the are linked to the federal government, usually through the Department of Education.
However, there are also private lenders who lend to students as a part of their student financing programs, but offer no credit check approval because the loans are guaranteed by the government too more affordable loans on offer to students.
Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHOR
Devora Witts is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Bad Credit Mortgage Loans. To get aid with your financial situation you can visit her at http://www.badcreditloanservices.com