If you are about to start college or pursue your degree programme, you might need some money to hit the ground running. Despite the fact that you are earning part-time job, it is likely that you feel cash-strapped.
The most useful part is obtaining money from a Student Loan Company. The government-backed funding will be much more manageable, and the best part is that you only have to start repaying the debt once you start earning. Further, you must earn over and above the threshold income to make payments.
It seems easy to apply for these funding sources, but you should not forget that you will need to meet the criteria. If you are not in a position to apply for these loans, you can turn to private lenders.
However, these loans work a bit differently. You can use these loans to fund your tuition fees, accommodation, or any associated cost, but you will be required to start making payments as soon as you borrow money.
This introduces how you can fund your education if you are out of work.
It is not critical that you should have a full-time job
You do not need to have a full-time job to apply for a loan to fund your education from an online lender. You just need to prove that you can repay the debt, so your passive income sources may come in handy.
These sources include income from rent, stocks, bonds, and so forth. You will be eligible for these loans if you have a part-time job, contract-based job or income from freelance services.
However, if you are one of those who do not have income from a part-time job, you are still eligible to qualify for these loans. If that is the case, you will need a co-signer, a person who will be willing to make payments.
It could be anyone with a steady income, including your parents or spouse. A lender will ask them to submit their income statement to know if they can afford to pay down the debt.
It is important for a co-signer to meet the eligibility criteria set by a lender. Though you meet the criteria, it does not mean that you will be able to qualify for better interest rates. Remember that the rates are decided by evaluating the lending risk. In fact, this specifies the quantity you can borrow.
If you are looking to borrow a student loan with the help of a co-signer, they should meet the following conditions to meet the eligibility criteria:
- The credit score should be good. Even in the case of a fair credit score, interest rates could be slightly higher.
- Income should be steady. However, a lender will sign off on the loan when you seem to be able to repay the debt without compromising with other monthly expenses.
- The debt-to-income ratio should be as low as possible. Ideally, it should not be over 25%, but keeping it as low as possible is better. Aim at 15%.
Repayment plans matter
The repayment plan may vary by lender. For sure, these loans are instalment loans, meaning you will be repaying the debt over a period of months, but the repayment plans could vary.
It is crucial to check which payment option will suit you best carefully. If not, you will find yourself into a debt trap. Some lenders may allow you to pay down money every month that goes toward both interest and principal, while others may allow you to pay down interest throughout the term and at the end to make the balloon payment to exit the loan.
Both options are convenient, but it depends on your income. If you feel that it will be harder to make one large balloon payment, you should opt for the first option. Otherwise, the latter one will be more manageable.
What if you do not have a co-signer?
If you do not have a co-signer, you will have to consider other alternatives.
- Instant loans for unemployed students
If you do not need a large amount of money, these loans could come in handy. A couple of lenders provide instant loans for unemployed students, provided you have a passive income source.
If you prove your repaying capacity and you have got a good credit score, you can take advantage of lower interest rates. You can get approval despite your bad credit rating. However, chances are you will get money at a slightly higher interest rate.
- Credit card
A credit card can also come in handy if you need a small amount of money to fund your college expense. The best thing about them is that you can avoid paying interest if you pay off the balance within the grace period.
It is worth noting that you will clear all the dues in one go. If you fail to repay it within the interest within the interest-free period, you will end up being charged a very high-interest rate.
- Get a part-time job
You should get a part-time job so you start making some money. Even though you arrange a co-signer, you should be earning some money. A few lenders will not entertain your application if you do not earn money at all.
Having a job will make it smoother and more comfortable for you to qualify for the loan. It also whittles down the risk involved in lending, so you are more likely to get money at the most competitive interest rates.
The bottom line
You can surely take out a student loan without a job, but you will need a co-signer with a strong repaying capacity. It is always suggested that you stash away some money that you can dip into in the hour of your need.
Further, you should try a part-time job as it reduces the lending risk and improves your chances of borrowing money at lower interest rates. It also helps increase your options.
Lisa Ann has developed a well-experienced professional career. From managing the staff of more than 50+ loan experts at Fastmoneyfinance to boosting the delivery of various loan offers, she has acquired many challenging roles to come out with the best results for the company. Lisa Ann is a Senior Content Author and the Chief Financial Advisor at Fastmoneyfinance. To back her massive experience in the UK’s financial industry, she has the postgraduate degree and diploma in Business and Finance.