Factors that affect how much money you will be able to borrow
Updated on August 21, 2020
If you are planning to attend college, you may be wondering how much you can borrow in student loans. The answer to that question is different for each borrower, and it depends on your credit score, the credit score of your cosigner (if you have one), and your income (if you are employed). Here’s what you need to know to determine how much money you can borrow:
1. The requirements of lenders vary considerably
Each lender has somewhat different requirements when it comes to the amount of money that you can borrow. Not only do their credit score requirements vary, but they also have different guidelines when it comes to borrowing limits based on income, employment status, and other factors.
2. Federal student loans are often best for people who will be borrowing large amounts
If you qualify for federal student loans, you’ll be able to get a lower interest rate than you would with a private loan. This makes it possible to borrow larger amounts of money and pay off your loans over a longer period of time without accumulating more interest.
3. If you don’t have a cosigner, taking steps to build your credit score is especially important
Your credit score is an important factor when it comes to the amount of money that you can borrow. In order to borrow sizable amounts of money, it’s essential to ensure that you always pay your bills on time and take other steps to improve your credit score.
A poor credit score tends to limit the amount that you can borrow considerably, but a credit score of 700 or more will help to ensure that you’re able to take out enough to cover the cost of your education. So, how can you boost your credit score? Using credit cards for purchases and always making the payments on time will help to improve it.
Also, paying back car loans, making mortgage payments, and paying your bills on time can improve your credit score. However, don’t expect improvement overnight. Improvement in your credit score can take a considerable amount of time.
4. You’ll be able to borrow enough to cover any program if you meet the criteria of lenders
If a borrower meets the criteria of lenders, you’ll be able to use student loans to cover the cost of medical or law school. This could be $300,000 or even more in some cases.