Most students secure a private student loan through the co-signature of a family member who guarantees that the loan will be repaid. However, interest rates on these loans can vary, depending on the creditworthiness of the cosignatory.

Running A Credit Check

Before applying for a private student loan, the cosignatory should obtain copies of his or her credit reports (get yours too!) Free copies of reports from the three nationwide consumer credit reporting companies – Equifax, Experian and TransUnion — are available to consumers at AnnualCreditReport.com.

Once the report is obtained, consumers should check them for errors. Even a small mistake, such as notice that you are late on a payment, can impact your creditworthiness. You’ll want to make certain that all information about you is correct and that you’re in decent shape to sign for a loan.

Good Credit = A Lower Interest Rate

Some private student loan lenders have tightened up their lending requirements in the face of a sluggish economy. This means that if there are problems with your credit report you could have you loan rejected or end up being charged a higher rate. Quite simply the better the credit, the lower the rate.

So, before you apply for a student loan, ask your parents to obtain copies of their credit reports first to head off potential problems. You want your private student loan application to be approved and you’ll want the lowest possible interest rate for the funds borrowed.

Further Reading

About Private Student Loans

Financial Aid Tools

Students feel credit crunch too