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Will My Credit Score Determine The Intertest Rate Of My Student Loan?
It is true a credit score affects the amount of interest an applicant will receive, not only on a student loan, but on any loan. Credit scores, which range from 300 to about 850 are meaningful, but even without knowing your exact credit score, you can determine your, so-called, credit worthiness by recognizing these 4 possible situations.
First, if you have any established credit.
Second, if you have any default, or many delinquencies,
Third, are you straight out of high school, or over 21 years old and,
Forth, if you have a co-signer who has established a good credit record.
The purpose of this article is to help you see where you fall on the typical student loan chart and to help you understand how the student credit system works.
Even without established credit, it is not very difficult to get a student loan. This is because student loans are geared for young people who have not yet been able to establish credit. The downside to this is student loans are notorious for for having higher than normal interest rates. The reason for this of course, is that the lender is taking a chance when he makes a loan to a person with no track record.
Still, the banks have many government backed programs, so there is always a pretty good deal available to anyone who has, at least not too horrible a credit score.
For anyone who has established a poor credit record, a student loan is still a possibility. In fact, even a student with poor credit and no money will be able to secure some type of student financing thanks to the government's intervention. The bottom line is you will not be denied an education because of a poor credit record if you're penniless. If however, you or your parents, if you are not yet 21 years of age, have anything it is more of a challenge for those with poor credit because the government doesn't cater to the middle or upper class.
Still, there is always some type of financing available. The problem is these types of programs come and go so you need to find a source who has up to the minute information. The key is that when you reach 21 you can try to go it alone and may qualify for better funding options because you are, basically broke, than you will find if the banks are targeting your parents.
This brings us to to co-signers. As you get older and start to establish credit and are credit worthy on your own, you may find your options are limited because your credit rating has not yet reached upper level. Here, a co-signer can mean a lot. However, this is not my favorite option. I like to think you could take about any kind of loan while you are still in school and then refinance to a consolidation loan with much better terms after graduation.
The key to successfully funding your college tuition is to recognize up front that you will get the money, but one of the keys to getting it is who knows where it is and this person usually doesn't work in a bank!
Copyright Ed Lathrop 2008
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