You want to get the training you need for a better job, but you’re worried about the cost. With the average undergraduate tuition sitting at $7,360 per year, and $40,114 if you’re an international student, you may need to take out a loan to pay for school. If you have poor credit, you may wonder if obtaining a student loan is possible.
Here’s everything you need to know about finding a student loan when you have bad credit.
Key Points
- You can get a student loan with bad credit through the government, banks and private lenders.
- Government loans don’t require a credit check, and private loans or bank loans may be available with a co-signer or steady income.
- Government student loans are the most accessible and affordable, offering no credit checks, no federal interest, and repayment assistance options.
- Alternative funding options like scholarships, bursaries, and co-op programs can help reduce or eliminate the need for student loans.
Can You Get A Student Loan With Bad Credit?
Yes, it is possible to get a student loan with bad credit; you just need to know where to go and how to maximize your chances of getting approved. In the following sections, we cover the types of lenders that offer loans to students with bad credit and what you can do to improve your chances of getting approved.
Bad Credit Student Loans From A Bank
Banks usually offer student lines of credit to both domestic and international students. To qualify, banks will consider your credit history, debt and income. If you have bad credit, you may still qualify; however, you’ll generally need to have a co-signer to back the loan.
For example, at TD, co-signer requirements are based on your credit history. If you’re an undergrad with no credit or poor credit, you’ll usually need a co-signer to qualify. Similarly, if you want to apply for a TD line of credit as an international student, you’ll typically need a co-signer who’s a Canadian resident and is also a TD customer in good standing.
| What is a co-signer? A co-signer is someone with a high credit score and finances who is willing to repay your debt if you’re not able to. A strong co-signer can make your bank feel more secure about lending you money and can increase your chances of getting approved. |
Features Of A Student Loan From Banks
- Line of Credit. Most student loans from a bank come in the form of a line of credit. With it, you can borrow what you need, when you need it, up to your credit limit. Like a credit card; you can use the money, pay it back, and then use it again.
- Deferred Payment. While you’re in school, you only have to pay off the interest. You don’t have to start repaying the principal until a certain number of months after you leave school. For example, with a TD student line of credit, your payments are deferred by 24 months.
Can You Get A Student Loan With Bad Credit From A Private Lender?
It is possible to get a student loan from a private lender when you have bad credit. However, these loans are not typical student loans. They are personal loans that you can use to fund your education.
If you have bad credit and no co-signer, private lenders may still extend you money, especially if you’re a mature student with steady income. But, it’s important to note that these loans come with higher interest rates, no grace periods, and immediate repayment
Private Personal Loan Features:
With a private personal loan, you can borrow a fixed amount of money and then pay it back over a predetermined period of time, including interest and fees.
- Loan amount. Varies, often $100 to $50,000
- Terms. Typically 1 to 5 years
- Interest rate. Higher for bad credit (often 9.99% to 35%)
- Repayment. There are no repayment buffers, like having 24-months after you graduate to start repaying your principal
Note: Private loans tend to have less strict borrowing criteria, making them easier to qualify for but often more expensive. As such, before taking on a private loan, look into other, more cost-effective options like government student loans.
What Do You Need To Apply For A Bad Credit Student Loan?
In addition to your credit score and financial information (sources and amount of income), your lender may also ask for:
- Personal Identification. Can include your passport, driver’s license, or other valid government-issued ID.
- Proof of employment. You might provide your pay stubs or an employment letter.
- Proof of enrollment. To prove your student status, you might provide a copy of your course timetable, an unpaid tuition invoice, or a receipt from paid tuition.
- Monthly expenses. How much do you spend on loans, credit cards, and lines of credit.
- Household expenses. How much do you spend on utilities, property taxes, insurance, etc.
| Should You Get Credit Insurance? Credit insurance, also known as debt insurance or balance insurance, helps you and your family pay off your loan or line of credit if you lose your job, have an accident, get sick, or die. It’s worth considering if you lack savings, have unstable income, or want to protect your family from your debts. But if you already have life or disability insurance, a steady job, or the policy is costly and full of exclusions, it may not be necessary. |
Can You Get A Government Student Loan With Bad Credit?
The Canada Student Financial Assistance Program (CSFAP) provides eligible students with grants, loans, and repayment assistance to help students who come from low and middle-income families.
Before the 2023-24 academic year, the CSFAP required students 22 years and older to undergo credit screening to reduce the risk of loan default. The same was true for funding from the Ontario Student Assistance Program (OSAP).
As of August 1, 2023, the federal government waived this credit check requirement.
Now you can apply for a student loan from the government without a credit check. But there are other requirements you must meet to qualify, such as demonstrating financial need.
Government Student Loan Features:
Government student loans are available to both full-time and part-time students. You only need to submit one application through your province or territory. When you apply, your province or territory will also assess your eligibility for grants.
Other important features of government student loans include:
- No credit check. Thanks to recent updates, you don’t need to worry about a bad credit score because there’s no credit check.
- No federal interest. In 2023, the government eliminated interest for the federal portion of your student loans, but you still have to pay interest on the provincial portion of your loan. For example, in Ontario, you have six months after you graduate before you need to start repaying your OSAP loan.
- Repayment Assistance Plan (RAP). If you’re struggling financially and can’t make your student loan payments, the Government of Canada offers assistance through the RAP and Repayment Assistance Plan for Borrowers with Disabilities (RAP-D). Depending on your income, you may qualify for reduced payments or no payments.
How To Improve Your Chances Of Getting A Student Loan With Bad Credit?
If you have bad credit and want to improve your chances of qualifying for a student loan, here are a few tips to consider:
- Build Credit. To improve your credit score, focus on paying your bills on time, only apply for credit when you need it, and avoid maxing out your credit cards. A higher credit score can help you qualify for more loans with better terms.
- Add a co-signer. Having a co-signer with strong financials and a solid credit score can improve your chances of qualifying for student loans. Make sure you both understand the consequences if you fail to make your payments.
- Find steady employment. With some lenders, having a steady source of income can improve your chances of getting approved. This helps to show that you have the ability to repay your loans.
Learn more: How To Get Approved For A Loan As A Student
Extra School Funding Sources
In addition to student loans, there are other ways you can fund your education, including:
- Scholarships and Bursaries. These are given based on merit or financial need and don’t require a credit check. You also don’t need to repay the money.
- Opt For Co-op Programs. In a co-op program, your school helps to match you with a job that’s relevant to your studies. Typically, you go to school for a term and then do paid work for a term. The money you earn during the paid work terms can help to fund your education.
- Work-study programs. The Government of Canada offers several loans and credits for those pursuing work-study programs. The Canada Apprentice Loan allows you to borrow up to $4,000 interest-free to cover the cost of an apprenticeship program. The Canadian Training Credit is a refundable tax credit meant to help cover the cost of tuition and course fees. The Windmill Microlending program offers low-interest career loans to newcomers.
Bottom Line
It is possible to get a student loan with a poor credit score. Including a co-signer can increase your chances of qualifying for a bank or private loan. As of the 2023-24 school year, government student loans no longer require a credit check. You can also pursue other funding options, such as scholarships, bursaries, and work-study programs.
