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Will your credit report affect your Stafford loan application?

By Derek Brown
Published: Tuesday, July 6th, 2010

The fear of bad credit reports has been viral these days. Many people panic about lapses in paying their credit card and utility bills because they thought it will significantly affect their mortgage rates and car loans. A little uneasiness is normal, but there is no reason for succumbing to panic attacks.

While fears of bad credit might be true for payment lapses of 3 months or more, bill payments delayed for a couple of days will not have such a significant effect of suddenly dropping you to subprime lending—or worse, to loan sharks. Besides, not all types of loans are credit report-dependent. There are a couple of loan applications that will not be affected by credit report. One of these loan applications that do not look into your credit standing is the Stafford loan.

Stafford loans are private students loans with a lower interest rate compared to other unsubsidized student aid loans. Aside from the extensive repayment plans which can last for up to 25 years, it also requires lower payments from the graduates in their first years at work. It does sound like a good consideration for loan applications. And it becomes even better as Stafford loan officers unveil that are not looking into your credit report in assessing whether you are eligible for a loan from their company.

Having said so, parents of students who have bad credit can still apply for an educational loan despite of their delayed payments in mortgage or utility bills. The downside of this loan, however, is that the borrowers must be able to repay the loan within the number of years declared in the loan policy. And that all educational loans must be repaid even after the declaration of bankruptcy (except in circumstances wherein repayment would endanger your basic budget for food and other necessary items).

But, looking at the brighter side of Stafford, the 25-year loan repayment is still a significant amount of time given to the borrower. And the fact that you do not need to have a good credit in order to avail of this is enough reason for students and their family to take advantage of this loan. The parent being able to send their child to a university and get a degree makes this loan a valuable investment in making sure that their child will be able to get a job and support himself in the future.

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