Loans for Students with No Credit

Procuring a loan with no credit is a difficult task since most lenders expect the borrower to have a good credit score and an established credit history. Although it may seem that loans for students with no credit are not feasible, there are a chosen few who are more than willing to provide loans for students who have no credit and no co-signer.

College Loans for Students
Federal student loans are synonymous with loans for student without a cosigner. Students, who have no credit history or a co-signer, are eligible to receive Federal Stafford loans and Federal Perkins loans. These loans are disbursed to students regardless of their credit score or their credit history. Perkins loans and subsidized Stafford loans are need based and are meant for financially constrained borrowers. However, all applicants are eligible to receive unsubsidized Stafford loans.

Private lenders like Sallie Mae, Nellie Mae and Student Loan Corporation also provide private student loans in addition to federal student loans. However, these loans carry a rate of interest that is much higher than the interest on federal student loans. Private lenders expect students to have a co-signer, assuming that the students have no credit history, since they are unwilling to assume the risk that is inherent in lending to people with less than satisfactory credit. Availing federal loans or private loans and paying them off on a regular basis can help borrowers establish a solid credit rating.

Home Loans for Students with No Credit
The Federal Housing Administration (FHA) allows students to avail home loans despite the latter not having an established credit history. The FHA Kiddie Condo Loan Program allows students to co-borrow with a blood relative. Both the co-borrower and the student sign for the loan and at least one of them is expected to occupy the house. The remaining rooms may be rented out and the rent may be used to make good the mortgage payments. The down payment, that is required on the loan, is just 3 percent or so of the purchase price of the property. A history of regular payments will help the student establish a good credit history and a satisfactory credit rating, thus paving the way for future loans that can be availed at a favorable rate of interest.

Car Loans for Students with No Credit
Banks and credit unions are generally unwilling to provide car loans to students with no credit. However, private lenders may be willing to provide car loans provided the student has a creditworthy co-signer. Procuring car loans without any credit and without a co-signer may be difficult on account of the following reasons.

Any car, which in this case is the collateral for the loan, will depreciate by as much as 30 percent within a couple of years of purchase. This also makes it difficult for people to refinance their car loan to a lower and a more favorable rate of interest. Hence, procuring car loans with no credit is a difficult task. Even if a student manages to procure a car loan despite having an unsatisfactory credit history, the rate of interest on the loan will not be favorable. The student may also be required to make a large down payment on the loan. A large down payment will have the effect of creating a relatively favorable amortization schedule. However, it is unlikely that students will have sufficient cash to make the requisite down payment.

It's obvious from the above discussion that, federal loans for students with no credit and no co-signer are a distinct possibility. Private loans for students are feasible provided the student has a co-signer. A credit-worthy co-signer can go a long way in helping the student procure a loan at a favorable rate of interest.