How to Get Small Student Loans for Bad Credit

Considering how expensive education is becoming, it’s safe to say that almost everyone needs a little extra money to get by. Of course, some can simply ask their parents for help. However, not everyone can be so lucky. And that’s exactly where student loans come into play. 

Now, the question is, can you get a student loan if you’ve got bad credit? And if you can, what should you expect? If you’re interested in knowing all this and more, continue reading. 

What this article covers:

What Are Student Loans?

student loans with high approval rate
A stack of one hundred dollar bills in a money wrapper labeled “Student Loan” on top of a blue graduation cap. A gold graduation tassel is draped over the stack of money.

 

Student loans, also known as study or education loans, are unsecured personal loans designed to help you with educational expenses. Whether you need help paying the tuition or getting a new book, a student loan can be your saving grace. 

Just like any personal loan, a student loan comes with fees and interest rates. And generally, the better your credit score, the more money you can borrow and the lesser your interest rates. 

But what can you expect if you’ve got really bad credit? Can you still take out a student loan, or will that option no longer be viable? 

Can You Get a Student Loan With Bad Credit?

Absolutely!

Believe it or not, many loan providers are willing to work with bad credit clients. Why? Because they believe that everyone deserves a second chance, regardless of their credit history.

Still, money lenders take certain precautions to ensure that they don’t end up loading all their money. For instance, they’ll raise interest rates and shorten the loan terms. They’ll also limit how much you can borrow.

So, while it’s possible to get low credit score student loans, keep in mind that your loan won’t have ideal conditions. Nevertheless, it’ll help you get through your school years without having to ask your parents or friends for help.

What Can Bad Credit Student Loans Be Used for?

People generally believe that student loans are only used to pay for tuition. However, they can be used for much more. 

You can use your student loan to buy uniforms, books, electronics, and equipment, as well as educational exclusions and trips. You can also use your loans for personal costs like food, housing supplies, rent, or bills. 

Basically, anything that you need to survive and thrive as you go through your educational journey. 

So, don’t decide your loan amount simply based on your tuition. Factor in the other hidden expenses and see how much you’ll really need. 

How Much Money Can You Borrow With a Student Loan?

small student loans for bad credit

Student loans can be anywhere from $500 to $10,000. Some lenders even offer up to $25,000. 

Unfortunately, bad credit clients don’t have access to such large amounts. That’s because lenders find it too risky to lend them these amounts. 

As such, you’ll find that most lenders will only offer up to $5,000 if you have bad credit. Some even cap the loan at $2,000. 

While it may not seem like much, these few extra dollars can help you along. And remember, if one lender isn’t offering as much as you like, try your luck with another. 

How Much Do Small Student Loans for Bad Credit Cost?

This will depend on the amount you borrow. 

For small student loans not exceeding $2,000, you’ll only be obliged to pay back the original amount in addition to a 20% establishment fee and a 4% monthly fee. So, if you’ve borrowed $1,500 to be returned in two months, you’ll end up paying:

  • Establishment fee: $300
  • Monthly fee: $120
  • Total: $1,920 

For loans under the $5,000 mark, you’ll have an interest rate that varies from lender to lender. Typically, though, it stays around 5.99% (with an annual percentage rate of 48%). However, it’s likely to be more for bad credit individuals.

Finally, for large sums exceeding $5,000, expect an annual percentage rate of around 21.24%. Again, it may be a bit higher if you’ve got bad credit, but nothing too ridiculous. 

What Are the Eligibility Criteria of a Student Loan With Bad Credit?

Thankfully, you don’t need much to take out a loan in Australia. All you need is to:

  • Be at least 18 years old
  • Be an Australian citizen or permanent resident
  • Have a regular income 
  • Have an active bank account, email, and phone number

How to Apply for a Small Student Loan

student loans for living expenses with bad credit

Applying for student loans nowadays is quite easy. You simply fill in an online application, attach a few supporting documents, and voila! All you need to do now is wait to hear from the lender.

Typically, you’ll get a response in 24-48 hours. That’s enough time for the lender to review your application and run a credit check. 

Once all that is finished, you’ll get a phone call aiming to confirm your details and discuss your loan conditions. And when you finally come to an agreement and sign the contract, the money will be deposited into your bank account. 

Note: Documents you need to provide with your student loan application include:

  • A copy of your ID / Driver’s license 
  • Proof of your income 
  • 90-day history of bank statements

What to Do If You Can’t Get a Student Loan With Bad Credit

If you can’t find a lender willing to give you the money you need, here are a few other options you can explore:

Get a Government Loan

The Department of Education and Training has been helping Australian citizens and residents pay for education for many years, primarily through the Higher Education Loan Program (HELP) program and the VET Student Loans. 

In a nutshell, HELP allows students to defer their tuition until they can start earning enough taxable income for the repayment. Similarly, Vet Student Loans help pay for the tuition of approved higher-level (diploma and above) vocational education and training courses.

So, if you happen to meet the eligibility criteria of any of these loan schemes, make sure to send in your application. 

Get a Co-Signer

If you can’t get a loan or if your loan conditions aren’t to your liking, your best bet would be to get a co-signer with good credit on board.

Not only will they help you get a lower interest rate, but they’ll also make it easier to borrow more money and have a longer loan term. 

bad credit student loans

Still, keep in mind that your co-signer will be held accountable if you can’t repay the debt. So, if you make a late payment or entirely miss it, the credit scores of both you and your co-signer will take a dip. So, always think twice before asking someone to be your co-signer. 

Find Free Aid

If you don’t think getting a loan is the right move for you, try looking at different aids. For instance, try to get a scholarship, grant or even a work-study program. Granted, it’s easier said than done. However, such things will make a world of difference. 

Alternatively, you can try working while in school. Get a part-time job near your campus to help pay the bills. Yes, it’ll limit your studying time, but it beats not going to school at all. 

Conclusion 

No matter what your credit history looks like, there’s a student loan out there for you. It may take some time and work, but you’ll eventually find a lender willing to lend you the money.

Granted, you won’t get the most competitive interest rate. But, in the grand scheme of things, it’s nothing you can’t handle.

Just make sure to make your payments on time, and if possible, try to find a co-signer. That way, your credit score won’t be in jeopardy, and your lender will offer you more appealing loan terms and conditions.

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