How To Get an Educational Loan with a Bad Credit Rating

One way of securing one's future career is through college education. Yet with the exorbitant tuition fees, books and other living expenses in getting a college education, it is quite difficult for students who don't have enough money to get that college education. For students who don't have the educational budget ready, student loans are an alternative means for students to pay for a college degree. The good thing about an educational loan is that there is hope for everyone--even those with a bad credit rating will still qualify for most loans. An educational loan is a great choice, since generally it is low in interest, and it is long-term allowing students to get through college and establish their careers before paying their loan back.

One source of student loans is federal loans. They are student loans provided by the government. They can be issued to either parents or students. If the parent of a student with a terrible credit rating has better than average credit, that student's interest rate will be lower. This kind of educational loan is more readily available with a consistent interest rate and more flexible policies about paying them off. Some of these loans are the Stafford Loans, Perkins Loans and Pell Grants.

  • The Stafford Loan can be a "subsidized or unsubsidized" loan. Both these loans work on the same concept, to grant students with bad credit ratings the money they need for their education. This kind of loan, however, can only provide a limited amount of funds. Due to this limitation, the amounts of these loans are so small that a student has to take multiple student loans to pay off his tuition fee requirement. This could be a difficult task for students, but due to a bad credit rating this type of educational loan nevertheless comes as a valuable rescue option.

    When applying for Federal Stafford Loans, a student or parent must file a Free Application for Federal Student Aid (FAFSA) through electronic means from the FAFSA website. Federal Subsidized Stafford Loans are based on the financial need of the loan applicant. This kind of loan is a low-interest, long-term educational loan in which a student is not obliged to repay nor pay interest while he is still enrolled as a college student with at least 6 credit hours or units. The student is considered the borrower for this kind of loan and not his parents.

  • Perkins loans on the other hand can grant an undergraduate and graduate student a total amount of $20,000 for the entire education program, in which the loan amount per year would be $1,000 to $4,000. With a higher loan grant, Perkins loans are considered as one of the best loan programs available.
  • Federal Unsubsidized Stafford Loans are the same, but here the financial need of the borrower is not considered. While enrolled, the student is required to capitalize or pay interest. Though a student could opt to defer interest payments until such time that he has to start repaying, the student is still responsible for payment of all interest that accrues. The interest that has accrued is automatically capitalized to the loan's principal.
  • Federal PLUS loans are low-interest and long-term educational loans that the parent of a dependent student receives. The parent and/or student starts repayment normally 60 days from the date the loan is disbursed with a repayment period even beyond 10 years.

With the different kinds of educational loan available, finishing college education is now possible for every student.


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