Students need loans because they don’t have time to go to class, study, and hold down a full-time job. Lets not forget that tuition can be extremely expensive, especially if you’re pursuing higher education.
Students of all ages face going into debt when you add up the costs related to school.
Luckily, cash-strapped students have a reliable student loans sources. A loan can really help you out. Here is what you need to know.
How To Get Approved For A Student Loan
The following steps can help your chances of securing a loan as a student:
1. Find Out If You’re Eligible
Before applying for a loan as a student, find out your lender’s eligibility requirements, then compare them to your financial and credit profile. Every lender has their own set of criteria that they require applicants to meet, though these requirements generally include the following:
- Reliable employment
- Healthy income
- Good credit
- Debt-to-income (DTI) ratio under 36% to 42%
If you fall short of any of these requirements, you may want to consider adding a co-signer to the loan contract. Many students ask their parents to serve as co-signers to reduce the risk for the lender and increase the odds of loan approval.
2. Get Pre-Approved And Compare Offers
Lenders typically offer loan pre-approval, which gives lenders a peek into your credit and financial health. With loan pre-approval, you can more accurately compare the types of interest rates and loan terms that various lenders offer. You can also you an online loan aggregator to make loan comparison shopping quick and easy.
3. Provide Documents Required For A Loan As A Student
Once you’ve narrowed down your options, you can formally apply for a loan with the lender. Your lender will then conduct a closer inspection of your credit and finances by requesting various documents from you, such as the following:
- Letter of employment
- Pay stubs
- Bank statements
- Tax receipts
- Statement of assets and liabilities
Ideally, you should have all the required documents handy by the time you apply for the loan to expedite the process. The sooner your paperwork reaches the lender, the faster your approval.
4. Get Approved And Funded
The lender will examine your application and all the documents you provided to determine your eligibility for a loan as a student. If approved, your lender will send over the loan contract. Review it, and if all looks good, sign it and send it back to the lender. You should receive your funds shortly after signing the agreement.
How fast you get the money depends on your lender. You can get the money as soon as a day or two after approval. However, conventional lenders usually take at least a few days or more to fund your account. Once you get your hands on the funds, you can use them to cover your post-secondary education expenses, including tuition, books, and other school-related costs.
Where Can You Get A Loan As A Student?
As a student, you can apply for a loan with any one of the following entities:
Bank
You can apply for a loan or line of credit as a student with your bank or credit union. These financial institutions typically offer the lowest interest rates on loans. However, you’ll need to meet strict loan requirements to get approved. You need a steady job, high income, and a good credit score. As mentioned, these can be tough to meet for a student without full-time employment and no credit.
Private Lenders
Private alternative lenders may be the easier route for students to take to get a loan. That’s because their lending criteria tend to be more lax than conventional lenders like banks and credit unions. Many lenders within the private lending sphere cater specifically to borrowers with bad credit or no credit, making them better suited for students who haven’t yet had the opportunity to establish a healthy credit profile.
Federal And Provincial Government
Both the federal and provincial (or territorial ) governments offer programs specifically to help students cover the costs of college or university. They may also offer grants or scholarships. For example, the Canadian federal government offers the Canada Student Loans Program (CSLP), which is designed to help cover a lot of the expenses incurred by students for post-secondary education.
Types Of Loans For Students
Students have a few options when it comes to accessing funds to help finance tuition. The option you choose depends on your needs and eligibility.
Government-Backed Student Loans
Government-backed student loans can be used to cover the cost of tuition, textbooks, residency, and other post-secondary education costs. These loans are provided by the government and do not have to be repaid until after you graduate.
You don’t apply for a specific loan amount with a student loan, unlike conventional loans. Instead, the loan amount the government gives you will depend on your family income and tuition costs, among other things.
Student Lines Of Credit
Students may also consider applying for a student line of credit, which provides them with access to a specific credit amount whenever needed. This financing product may be considered if you’re unable to qualify for a government-issued student loan, or if your government loan doesn’t provide you with enough money.
You can withdraw as much or as little as you like, and pay interest only on the borrowed funds. Interest begins to accrue immediately after withdrawal. Once this money is paid back, you’ll no longer be charged interest, and the line of credit can be used over and over on an as-needed basis.
Student Line Of Credit Options With Banks
Canada’s big banks offer lines of credit options for students. A line of credit may be an ideal way to access funds, especially as additional costs are incurred throughout the years of study.
Here’s what the big banks in Canada currently have to offer in terms of lines of credit for students and the credit limits for each:
| Bank | Maximum Credit Limit |
| BMO | – Up to $20,000/year – Up to $80,000 in 4 years |
| CIBC Education Line of Credit | – Up to $60,000* throughout entire program (*up to $15,000/year for full-time students or a $7,500/year for part-time students) |
| RBC | – Starts at $5,000 |
| Scotiabank | – Get up to $100,000 depending on your program |
| TD | – Up to $80,000 for undergraduate programs – Up to $100,000 for graduate programs – Up to $350,000 for professional programs (ex: medical/dental students) |
Personal Loans For Students
A personal loan is an option for students who may not be eligible for a government-issued student loan or who need more than what the government is willing to offer.
You can apply for a personal loan from a bank, credit union, private lender, or alternative online lender. Loan amounts range from $1,000 to $50,000 and can be used for a variety of purposes, including covering the cost of school. Interest rates range from 2.00% to 46.96%, and loan terms vary from 1 to 7 years.
The rate the lender offers you is based on your income, debt, and credit score. You can lower your rate to make the loan more affordable by securing the loan against a valuable asset, such as a car or home.
How To Increase Your Chances Of Getting A Loan As A Student?
If you have low income and a non-existent credit history, consider the following to help increase your chances of getting a loan as a student.
Get A Guarantor
Sometimes the best way to ensure loan approval is to have a guarantor sign the loan along with you. A guarantor is an individual who guarantees to pay your debt if you ever default on your loan at any point. Usually, a guarantor is used when the primary borrower has bad credit, but they can also be used when you have no credit established as well.
How Can A Guarantor Help You Get A Loan As A Student?
With a guarantor loan, your approval will be based on the guarantor’s credit and financial profile. As such, you’ll be able to get approved for better loan rates and terms than if you applied on your own. Here are some perks to having a guarantor:
- Access Larger Funds – A guarantor can help you get approved for a larger loan amount.
- Get A Lower Interest Rate -Lenders typically award borrowers with good credit with a lower interest rate, which makes the overall cost of the loan much more affordable. With a guarantor with good credit, you’ll be able to take advantage of these lower rates.
- Get Approved More Easily – Since your guarantors, financials and credit are in question instead of yours, you’ll likely qualify for a loan faster. Moreover, once you have one loan on your track record that shows you’ve responsibly paid off the loan, you’ll then be able to get approved for loans in the future without having to depend on a guarantor.
How To Choose A Guarantor?
- Choose someone you trust, such as a parent – Ensuring that the guarantor is trustworthy is crucial, as you want to make sure the individual can be depended on if you ever fall on hard times.
- Make sure your guarantor is in good financial standing – Only people who have solid credit and a healthy income should be considered to fill this role.
- Find the right lender to work with – Not all lenders necessarily approve of working with guarantors, so be sure to shop around and find a lender who is willing to approve a loan with a guarantor’s signature on it.
Build Your Credit Score And History
As mentioned before, it can be nearly impossible to build credit without the right tools, such as credit cards and loans. Building credit involves having credit that you make payments against. By taking out a guarantor loan, you’ll have access to a financial tool that will provide you with the opportunity to make timely payments and therefore help you build good credit.
Why You May Be Denied A Loan As A Student?
If you’ve started looking into getting a loan as a student, you may have quickly realized that it’s a lot tougher than it seems. Here are just a handful of reasons why students may find getting approved for a loan rather difficult.
- Not Enough Income – Most lenders have a minimum income requirement to get approved for a loan. As a student, you probably don’t have a job. And if you do, it’s probably part-time and doesn’t pay you enough to qualify for a loan.
- Your Credit is Limited – or Non-Existent – Lenders usually look at a borrower’s credit score and credit history before approving a loan. Your credit will tell the lender your likelihood of repaying the loan on time. However, as a student, you probably have very little or no experience with credit, which could lead to loan denials.
How Can You Build Credit As A Student?
So now that you know why having credit is important, you may want to take steps to start building it. The best way to start building credit as a student is by taking out a credit card. If you make your payments on time, keep your debt-to-credit ratio low and keep your account open, you’ll be able to build your credit.
Alternatives To Private Student Loans
If you’re unable to qualify for a private student loan due to lack of credit, low income, or unstable employment, there are some programs offered by the federal government to consider:
- Canada Student Loan Program – Both part-time and full-time students may qualify for the Canada Student Loan Program, as long as their situation meets the eligibility criteria. If you qualify, you can get up to 60% of the cost of your tuition, up to a specific amount.
- Canada Student Grants Program – The Canada Student Grants Program is available to students in financial need. Unlike a student loan, the funds received through this grant do not have to be paid back when you graduate.
Loans For Students FAQs
Is no credit better than bad credit?
Can I get a loan as a student with no credit score?
Are there loans offered to international students?
Final Thoughts
If you’re a student in financial need, you have a few options to help you cover a big chunk of your tuition. Personal loans offer flexibility to be used for a variety of purposes, including paying for post-secondary expenses. And if you can’t meet the stringent loan criteria for personal loans, you may be eligible for a government-issued loan to alleviate the financial burden of paying for school.
