How to qualify for a private student loan

Paying for school can be challenging for students, especially as higher education costs continue to climb. While federal loans are available, along with grants and scholarships, some students may need to take out more than is available to them to pay for all of the living expenses associated with college.

Private student loans can provide some students an opportunity to cover those costs. Requirements for private student loans will vary depending on the lender. Borrowers also need to know the rules on how they can use the funds before taking out the loan.

Private student loan eligibility requirements

After applying for federal student loans, you may still need to cover leftover expenses with private student loans.

Before applying for a private student loan, it’s a good idea to check whether you meet the basic requirements. The five private student loan requirements below are the most common among lenders, although all lenders have different standards.

School

Private lenders typically start with the basics, so they’ll first require that you’re a student pursuing education. You’ll also need to attend an accredited school, which typically includes four-year colleges and sometimes two-year community colleges and trade schools.

Most lenders also require you to be enrolled at least half time at your school, but some lenders have private student loans specifically designed for part-time or career-training students.

  • How to prepare: If you’re not sure whether your school qualifies, ask the lender for a list of acceptable schools or ask about the specific school you’re interested in attending. Your school’s financial aid office can also give you tips on paying for your education.
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Credit score

Private lenders typically check a borrower’s financial standing to help them analyze the risk they take by lending money. They’ll run a credit check to see how you’ve handled debt in the past.

It can be tough to qualify independently without a credit history or a limited one. Many lenders won’t advertise a specific minimum credit score, but a score in the mid-600s or higher can help you meet private student loan credit score requirements. As your credit score increases, you’ll have more borrowing options and may receive a lower interest rate.

  • How to prepare: If you don’t have the credit history to qualify for a private student loan, you might consider holding off on your application for a few months. Improve your credit to qualify for the loan and get a good interest rate. If you don’t have the time, you may need to apply with a co-signer who meets the lender’s credit requirements.

Income

In addition to credit requirements, lenders typically have minimum income requirements. Sometimes, it can be as little as $24,000, but the higher your income, the better. Lenders typically ask for documentation showing your employment status and earnings and calculating your debt-to-income ratio to see how much of your monthly income goes toward debt.

How to prepare: If you don’t have the income to qualify, look for jobs you can take on while enrolled in school. Alternatively, you can apply with a co-signer willing to take on the responsibility of paying your student loans if you can’t.

Qualified expenses

Private student loans are designed to cover your cost of attendance, which usually includes:

  • Tuition and fees.
  • Housing expenses.
  • Transportation to and from school.
  • Meals.
  • Textbooks and supplies.

Your lender determines your cost of attendance by contacting your school’s financial aid office after you apply. The school will confirm the cost of attendance, certify the amount you’re asking to borrow and disclose other financial aid you’ve received.

  • How to prepare: While a private student loan can be a convenient way to cover expenses while in school, it will eventually need to be repaid. Consider paying for some of your costs with savings, income from a part-time job or college scholarships and grants. These options can minimize your postgraduation costs.

Age and citizenship

Most lenders also include requirements surrounding age and citizenship status. An applicant must usually have a Social Security number and be a U.S. citizen or permanent resident.

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Borrowers must also be at least 18 with a high school diploma or equivalent, such as a GED. Some states set the minimum age at 19.

  • How to prepare: If you don’t meet age requirements, ask the lender if you can qualify with an older co-signer. If you’re an international student, you may still be able to qualify for a private student loan with a co-signer who is a U.S. citizen.

How to qualify for a private student loan if you have bad credit

If you’re new to credit or recovering from a setback in your credit history, you might not be in a good enough place to qualify for a private student loan on your own. Most lenders require applicants to have good credit, but you may be able to qualify even with bad credit.

Apply with a cosigner

One common way to get a student loan with bad credit is to apply with a cosigner who has good credit. A cosigner agrees to repay the loan if you can’t, so you share the responsibility for repayment. If you default on the loan, it’ll hurt both your credit score and your cosigner’s credit score.

Consider applying with a lender that has a low minimum credit score requirement

If you cannot find a cosigner, consider applying with a lender with a low minimum credit score requirement. For example, Earnest’s minimum credit score requirement is 650, though you’ll need an income of $35,000 to qualify. In addition, lenders like Ascent offer loans based on factors beyond credit, such as your major and GPA.

How to choose a private student loan

While shopping around for a private student loan, consider these factors:

  • Compare annual percentage rates (APRs). Your APR is a better measure of how expensive a loan is since it includes the interest rate a lender charges plus fees. Some lenders allow you to prequalify without, which allows you to compare estimated rates and terms without harming your credit, though prequalifying doesn’t guarantee approval.
  • Your school’s eligibility. Contact the lender before applying to see if your school is on its approved list.
  • Perks. Some student loan companies offer benefits, such as co-signer release and lengthy grace periods.
  • Loan amounts. Make sure the lender offers your desired loan amount before applying.
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How to apply for a private student loan

If you’re ready to apply for a private student loan, take the steps below:

  1. Check your credit. Check your credit score to know whether you meet a lender’s minimum credit score requirement before you apply. That way, you’ll know if you need a co-signer or to find another lender.
  2. Shop around. Shop around and compare rates, terms and features across as many lenders as possible to find the best deal for you. You can get prequalified with each lender or use a loan aggregator like Credible.
  3. Submit a loan application. After you’ve found a lender that best matches your needs, submit an online loan application. You’ll provide information about yourself and your school, and you’ll also need to provide the necessary documentation for yourself and your co-signer, if applicable.
  4. Wait for disbursement. If your application is approved, the lender typically disburses your loan directly to your school. If there’s any money left over, you’ll receive a refund, which you can use for other eligible expenses.

The bottom line

Many private student loans require a minimum income or credit score, so borrowers should be prepared for a credit check and application process. They will also want to be sure that their school and enrollment qualify for private loans before borrowing. Many states also set a minimum age for borrowing these types of loans.

Students who are not eligible to borrow on their own may be able to do so with the help of a co-borrower. Many private loans must be used for specific types of expenses, so understanding how much is needed can be helpful before applying.

Comparing lenders, their rates, and terms is an important part of qualifying- and applying- for a private student loan. Companies can have different eligibility requirements and repayment terms, so knowing the nuances can save borrowers money in the long run. Consider all your options, including grants and scholarships, before agreeing to a loan.

Frequently asked questions

  • Are private student loans harder to get than federal loans?

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  • Do you have to qualify for private student loans?

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  • Can you apply for a private student loan at any time?

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  • Should you apply for federal or private student loans first?

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  • What is the difference between private and federal student loans?

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