06 Jul The Quick & Easy Way to Get a Student Loan Without a Cosigner
When looking for a loan, students find that the majority of student loan lenders require applicants to have a cosigner in order to get approved. For many students, getting a cosigner is an improbable task, and students left to face with unfavorable loan terms by lenders who view them as high-risk borrowers without a cosigner.
Students already face the stress and workload that already comes with being enrolled in school, and facing high-interest loan rates due to not having a cosigner is tough to deal with both financially and mentally.
Here at Stilt, we believe this shouldn’t be the norm, so we’ve put together this guide to help you find the best loan for you – even without a cosigner.
The 3 Typical Criteria for Getting Student Loans
Like any other loan, potential borrowers need to fulfill certain requirements in order to receive a loan. Typically, there are three qualifications to easily become approved for a student loan in the US.
Be a U.S. Citizen or Permanent Resident
The first qualification is being a U.S. Citizen or having permanent residency status in the US. Non-U.S. citizens are often considered by lenders to be high-risk borrowers since many visa holders have a limit on their time in the country. Therefore, once they leave, it may be more difficult to have their loan terms transfer with them overseas.
In order to prevent issues for non-US citizen applicants, the lender will often require for the applicant to have a cosigner who is a U.S. citizen which alleviates this concern about being a high-risk borrower.
Unfortunately, many non-US citizens are not able to find a US citizen who will be willing to cosign on a loan which makes this first qualification difficult to satisfy.
Good Credit Score and Credit History
This next criteria allows lenders to assess your potential responsibility in paying back one of their loans. When lenders loan out money, they need to know that it will be paid back within an adequate time and a good credit score shows that you have a track record of upholding that responsibility.
A good credit score starts by building a record of responsible credit borrowing. People who regularly pay their bills on time and have a history of very few or no credit problems will have a high credit score showing lenders that they are a good candidate for a loan.
The difficulty with this criteria is that many foreign students have no history of credit in the US. Although they may have a great credit track record in their home country, that will often not transfer over to the US.
In addition, many loans have a minimum credit score requirement, but international students will not be able to meet that requirement since they don’t have a history of credit in the United States.
Without a good credit score or credit history to prove financial responsibility, many foreign students are left with high-interest rate loans, or disapproval from a lender’s loan altogether.
Income shows lenders that a borrower will be equipped to pay back the loan within the term period of the loan.
Some lenders will have a minimum income threshold in order to qualify, whereas others will accept any income amount and will adjust the loan terms based on that income.
Lenders use a debt-to-income ratio (DTI) to determine the ratio of your monthly debt compared to your gross monthly income. Your debt-to-income ratio shows lenders if you are in a capable position to pay back a loan or if you are going through a financial hardship(a DTI of over 40%). If you have an excellent debt-to-income ratio (typically a DTI of 20% or lower), you will be much more likely to easily qualify for a student loan.
Federal Student Loans vs. Private Student Loans
There are two main types of student loans: federal student loans and private student loans.
Federal loans are solely funded by the federal or state government and include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Federal Perkins Loans.
For most federal loans, you must have permanent residency status in order to qualify.
Therefore with a federal loan, most international students will not qualify, unless they have gained permanent residency status.
Private student loans are any loans that are funded by lenders such as a credit union, bank, or school. There are hundreds of lenders available all with varying interest rates and terms.
Since there are so many private student loan lenders, the requirements for this type of loan varies immensely. You will find that some lenders have strict requirements whereas others are more lenient and willing to work with your personal situation.
Repayment starts after graduation or leaving school
Repayment often begins while you are still earning your degree
Direct Subsidized Loans: 4.45%
Direct Unsubsidized Loans for undergraduates: 4.45%
Direct Unsubsidized Loans for Graduate or Professional: 6%
Direct PLUS Loans: 7%
Varies by lender and loan
Typically no cosigner needed
Often requires a cosigner
US Citizen or Permanent Resident
Varies by lender but usually required to be a US Citizen or have a cosigner who is a US Citizen
No credit check needed
Usually requires a soft credit check and minimum credit score
How to Apply for Student Loans with No Cosigner
As mentioned above, most private student loans require a cosigner in order for loan approval. Yet, many students who need a student loan don’t have access to another individual who meets the qualifications for a cosigner.
International students in particular face loan refusals due to their lack of resident status and credit history in the US. Although many international students are in dire need of student loans to help fund their international travel, living costs, and tuition, these students are often the most disadvantaged when it comes to getting approved for a loan.
Luckily, there are a few lenders who will consider students without a cosigner for a loan. Here are a few tips to improve your chances of getting approved for a student loan without a cosigner.
Demonstrate Financial Responsibility
One of the best ways to be approved without a cosigner is showing that you will be a responsible borrower and have a history of being financially responsible. This can be done through any of the following forms:
- Presenting bank statements and pay stubs
- Holding a higher education degree
- Demonstrating a low Debt-to-Income ratio through having low debt and good income
- Borrowing less
- Paying off debt
- Building credit
Anything that demonstrates your personal responsibility and a history of responsible financial decisions will help make the case that you are a good loan applicant.
If lenders see from these documents that you are in a position to pay back the loan in an adequate time, they will be much more likely to approve you for their loan without a cosigner.
Remember that a cosigner is used so that the lender has someone else to hold responsible for the loan if you become unable to pay it off yourself. However, if you show that you will be responsible and will likely have no issues with paying off the loan yourself, then they will be less adamant on requiring a cosigner in order to become approved.
Research Online Lenders
Although many lenders will not consider borrowers without a cosigner, there are a few lenders out there that do offer great loans without the need of a cosigner. Many of these lenders will take other factors into consideration in order to give you good loan rates.
For example, if you have a job offer waiting after you graduate or an undergraduate or graduate degree that you’ve already completed, this may be enough for some lenders to approve you for their loans. You just need to research the ones will take these other factors into consideration.
International Student Loans with Stilt
Stilt is a prime example of a lender who doesn’t require a cosigner in order to be approved for great loan rates and terms. Unlike most lenders, Stilt dedicates themselves to helping underserved communities such as students, immigrants, and international students.
Many of these types of applicants are not approved by other lenders because they don’t have a cosigner or a history of great credit. However, Stilt takes a holistic approach in approving applicants by looking at a variety of factors in assessing financial responsibility.
Loans are easy to apply for through Stilt’s online application system and applicants will conveniently receive their decision within 24 hours of submitting their application.
You don’t need a credit history, social security number, high credit score, or cosigner to be approved for one of their low-cost loans making Stilt one of the best options for international students.
You can learn more about loans from Stilt through their website at Stilt.com.
What are the Risks of taking a Student Loan with No Cosigner?
Taking out a loan is a huge financial decision and responsibility and not having a cosigner puts your financial future at a much larger risk.
When determining whether taking out a student loan without a cosigner is right for you, you should consider the following risks that come with not having a cosigner:
Damaged Credit Score
Without having a cosigner to alleviate the financial pressure of the loan off of you if you become unable to pay the loan off yourself, you may find that your credit score will quickly decrease if you begin making late payments, or don’t make payments at all.
The only way to increase your credit score again would be through paying off the loan yourself, since, without a cosigner, no one else will be held responsible for paying back the loan.
To prevent this, you can try to find lenders that offer repayment postponements when facing financial hardships. Many lenders out there will allow you to push off your loan repayments when you notify them that a financial hardship has come up. This prevents a decrease in your credit score while you get your finances back in order.
Inability to Qualify for Loans and Credit Cards in the Future
When wishing to apply for another loan in the future, or for a credit card, a lender that sees that you already have an existing loan without a cosigner may be unwilling to approve you for another loan or credit card until you pay back the first loan.
This can become a problem when a large expense comes the way that you don’t have adequate funds for such as rent payments or more tuition costs. If you are in dire need of another loan, it will likely have higher interest rates compared to another borrower who doesn’t already have a loan.
Therefore, you should highly consider the extent of your need for a loan. You should always explore other options before settling on taking out a loan for your educational costs.
Inability to be Released from the Loan
A cosigner lets the lender turn to another person to pay back the loan if you end up not paying it back yourself. However, if you do not have a cosigner, you are solely responsible for repaying the loan and will not be released from the loan until you do pay it back.
If you end up not paying it back by the time your loan term ends, you will face collections which is not only an annoyance but also a huge financial burden. Debt can follow you for years and can be a detriment to your financial future.
Higher Debt-to-Income Ratio
As mentioned above, the debt-to-income ratio (DTI) determines the ratio of your monthly debt compared to your gross monthly income. Taking out a loan without a cosigner can increase your debt, which therefore will increase your debt-to-income ratio as well.
Being a student is already a stressful position to have and not having the funds to pay for the cost of your education only adds immense stress on top of your academic and personal responsibilities.
Fortunately for lenders such as Stilt, not having a cosigner is not the end of the road when wanting to apply for a low-cost student loan. Stilt is dedicated to helping students build their financial future and hopes to help you reach your educational and financial goals through one of their loans.
You can learn more about Stilt through their website or ask questions in the comments!