If you need money for school but are worried about having little or no credit, you may still qualify for a student loan. You can use student loans to fund your education and as a way to build your credit as you pay them off.
Stafford loans are backed by the government and are offered to students with little or no credit. Check with your school about their availability. Credit history is often not a factor in the disbursement of Stafford loans.
Perkins loans are also available to students, and credit history is not taken into consideration. Perkins loans are funded by the government and awarded to those deemed to have the greatest need. Availability is limited.
Perkins and Stafford student loans are a set amount to be awarded each year. Another option for education are PLUS loans. PLUS loans are government sponsored loans for parents of students.
Lenders do not look at a borrowers credit score when deciding whether to award one of these types of loans. This is because they are backed by the government. They will check a potential borrowers credit history to determine if they have any late payments or defaults on other loans. If there are, the borrower may or may not be given the loan.
Government-sponsored student loans can be deferred for various reasons, such as unemployment. The loans have low interest rates, but must be repaid.
If a borrower falls behind on their payments, the government can act as its own bill collector. It has the power to confiscate federal tax refunds and garnish wages.
Additionally, student loans are usually not forgiven, if a borrower declares bankruptcy. All things considered, if you need a loan for school, government-backed loans are a good option, especially if you have not established credit yet.
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