Unfortunately, you cannot get a conventional loan with defaulted student loans. However, there are options available to help you pay off your defaulted student loans if your credit has improved over the past few years. You can consider other ways to be eligible for a conventional home loan too by using cash-out refinance.
Yes, you can get a conventional loan with defaulted student loans.
There are a lot of myths out there about whether you can get a conventional loan with defaulted student loans—and the answer is: yes! There are people who will tell you that you have to wait at least seven years after your last student loan payment before you can apply for a conventional loan. That’s not true!
You can get a conventional loan with defaulted student loans as soon as you’ve made your last payment and entered the grace period (which varies depending on what kind of loan you have).
Keep in mind that if your credit score isn’t great, you might have to pay a higher interest rate. But if you’re looking for a way to improve your credit score and build up equity in your home, this is one way to do it! This article also discusses can you get financial aid with a defaulted loan, what type of loan is a smart option student loan.
Can I Get A Conventional Loan With Defaulted Student Loans
Introduction
Few things are as stressful as taking out student loans, knowing you’ll be paying them back for the rest of your life. Unfortunately, many borrowers don’t realize that even after they graduate and start working in their field, there’s another hurdle to clear: getting a mortgage. In fact, the very fact of having student loan debt can make mortgage approvals more difficult! If you already have a mortgage, but want to refinance it or take out an equity line of credit (HELOC), you may find yourself facing some serious obstacles.Unde
rstand your options.
If you have student loans and are looking to do some home improvements, consider other options.
- Consider refinancing your student loans. Refinancing is another name for consolidating or combining your existing debt into one new loan. It’s like taking out a brand new loan and paying off all of your old debts with it, except that the interest rates will be lower because you have a lower credit score and/or less money available for the downpayment on a house. This may be helpful if you want to get rid of some high-interest student loans but don’t want to use those funds for anything else – such as buying a house! Be sure though not to take out any additional debt while doing this; just pay off what you already owe instead (and then some).
- Consider applying for other types of loans instead such as home equity ones where they might allow higher amounts towards closing costs or down payments than conventional ones would allow; this could help lower monthly payments while still helping fulfill other important financial needs such as buying a car or starting up an emergency fund! Another option would be trying something called “debt consolidation” which involves taking out one large loan against everything owed at once instead
Get organized and stay on top of your money.
- Get your finances in order.
- Understand your financial situation and create a budget.
- Track your spending so that you can see where money is going.
- Know what you owe, both short- and long-term. This includes credit cards, student loans and other debts such as car payments or mortgages. It also includes assets like stocks or retirement funds that are available to pay off debt if necessary.
- Know how much income you have each month (including any potential side hustles) and how much it costs to live day-to-day: rent/mortgage, food bills (think groceries + eating out), gas for transportation costs (car payment), utilities like electricity + water bills, etcetera.
Pay your bills on time.
When it comes to student loans, there are a lot of different consequences that can happen when you don’t pay. If the loan is federal and the government hasn’t been able to work out a payment plan with you, they will start garnishing your wages from your employer. In some cases, this can even mean seizing your tax refunds and other types of government assistance. State laws vary widely in terms of what happens if you default on private student loans, but in general it’s best not to get into debt trouble at all because there will be severe consequences for doing so.
If you have already been delinquent on payments or defaulted on repayment plans—or if you’re starting out with a poor credit history—it may be difficult for lenders who don’t understand how bad things are right now for Americans’ finances as a whole
Stay vigilant.
- Stay on top of your finances.
- Make sure you are always on time with your bills, including student loans.
- Check your credit score regularly, and make sure it is in good standing.
- Do not miss payments or make them late.
You can get a conventional loan even if you have defaulted student loans
You can get a conventional loan even if you have defaulted student loans.
If you are repaying your defaulted student loans through the US Department of Education’s repayment programs, such as Income-Driven Repayment (IDR) plans or forbearance, you may be eligible to get a conventional loan and still keep your IDR plan or forbearance in place. However, in some cases lenders may require that all of your federal student loan debt is consolidated before approving your application. In this situation, it is possible that one lender will allow continued repayment under an IDR plan and another lender will not allow continued repayment under an IDR plan and instead requires that all of your federal student loan debt is consolidated before approving your application. This can make finding a lender difficult if they both require different things from applicants with defaulted federal loans; however there are ways around this issue described below:
- If you want to apply for an FHA-insured mortgage but borrower has delinquent Federal Student Loans: Contact Fannie Mae’s Student Loan Center at 800-732-6643 or via email at fanniemae@serviceriskmanagementgroupfnsbgovbethomepageusgovlncsifr_studentservicecenterdqcncscqhkqx20y2uwo823gv7je3dtwpzw7e8adu5jt327v9xt0bsdva1a2eef5hck0uml5rxxw1558r08hf47540i3643e9q9yiaet20yrmhtn726c1fb92pmepwcg2464aqkfbdskfmahpoe68xgds6xshns638uyzs4jpqm1szs2iz8|79co>
While it is possible to get a conventional loan after you have gone into default, it is not going to be easy and will require some effort on your part. You need to demonstrate that you are capable of paying back the loan and that the situation was an anomaly for you. That could mean having a co-signer or making payments on time for a certain period of time before attempting to get another student loan.
can you get financial aid with a defaulted loan
When The National Student Loan Data System (NSLDS) indicates that you are in DEFAULT on a federal loan, you cannot receive federal financial aid until you resolve the default. Once you can show that the default has been resolved, you can re-apply for the Direct PLUS loan.
what type of loan is a smart option student loan
Today, roughly 46% of first-time students attending college full time receive some form of student loans. The percentage increases when you include part-time and graduate students. With so many choices out there, sometimes finding the right student loan seems overwhelming. Today, we’ll review the Sallie Mae Smart Option student loan so you can see if it’s right for you.
Student loans come in various shapes and sizes. Some are designed for undergrad studies, while others are better suited for post-graduate work. Plus, there are decisions to make on whether a variable or fixed-rate loan is best for your situation, whether you need a co-signer, and which repayment option is right for you.
Sallie Mae’s History
When it comes to student loans, Sallie Mae has been around for a while. It was formed in 1972 as a guaranteed student loan program and was privatized in 2004. Although the company lost the ability to issue loans with below-market interest rates, it was able to successfully compete in the private sector by acquiring competitors and expanding its portfolio of loans.
Sallie Mae stopped servicing student loans in 2014 as the company came under scrutiny for its loan-servicing tactics. Several civil suits brought against Sallie Mae resulted in significant financial penalties for illegally charging members of the military higher interest rates.
Today, Sallie Mae is the largest lender of private student loans. The company is now publicly traded and listed on the Nasdaq.
Who Can Receive a Sallie Mae Smart Option Student Loan?
Sallie Mae’s Smart Option loan is specifically designed for undergraduate students, allowing them and their parents to borrow the total cost of attendance, including living expenses. That’s a massive benefit if you are strapped for resources during your undergraduate years. An additional benefit is that this loan is available to both full- and part-time students.
Either the student, parent(s), or both can sign or co-sign this loan. Sallie Mae also offers a separate parent loan, but the Sallie Mae Smart Option loan has a few more benefits. For this loan, the student is the primary borrower, though you’ll have a much higher chance of being approved if you have a co-signer.
Interest rates can either be variable or fixed. For variable loans, at the time this article was written, the rates ranged from as low as 2.75% APR to 10.65% APR. The rate you receive depends on many factors – most importantly, your credit history and ability to repay the loan. Typically, only the most creditworthy applicants receive rates on the lower end.
An important point to remember about variable loans is that they can rise and fall based either on the London Interbank Offered Rate (LIBOR) or the Prime Rate. Also, be aware that Sallie Mae reserves the right to modify or discontinue any of its products or services.
At the time of publishing, fixed-rate loans ranged from 4.74% to 11.85%. While you may incur higher interest charges, fixed-rate loans will remain constant as long as you meet the terms of your loan.
Loan amounts can range from as little as $1,000 to 100% of your college expenses.
How to Apply for the Sallie Mae Smart Option Student Loan
Before you apply for this loan, it’s recommended that you complete the Free Application for Federal Student Aid (FAFSA) to see if you qualify for any grants or loans.
In most circumstances, federal aid options outweigh those of their private sector counterparts in benefits and costs. Students who qualify for subsidized Stafford loans save money since the federal government absorbs the costs of interest payments.
Additionally, federal student loan programs offer repayment plans based on need and income. In contrast, private sources rarely, if ever, offer this benefit. However, one of the best benefits of federal student loans is your creditworthiness is not a factor. The lone exception to this is the PLUS loan.
After determining if you qualify for any assistance, you can then evaluate your situation and apply for the Smart Option loan. Once your completed application is submitted, it typically takes less than 24 hours to receive a response.
Prospective students who are eligible to apply for the Sallie Mae Smart Option student loan include U.S. citizens, permanent resident aliens, and even non-U.S. citizens as long as they have a permanent resident co-signer.
One downside after applying is not knowing the minimum credit score Sallie Mae uses to evaluate your application. However, you’ll be happy to know there are no application or origination fees associated with this particular loan.
Repayment Options
One of the many benefits of the Sallie Mae Smart Option student loan is that you have flexibility on how the loan is repaid. The three repayment options are:
- Make no payments while you are attending school.
- Make $25 fixed payments while in school.
- Make monthly interest payments while in school. The interest rate is usually one percentage point lower than the deferred repayment option.
You can repay the loan’s principal and interest at any time with no prepayment penalty. Most student loans have a repayment length of about 10 years. However, the length of your repayment period will vary depending on the amount owned, the principal and interest paid, and whether or not you defer payments for any reason.
If you choose to pay your student loan while you are still in school or if you elect the automatic debit plan, your interest rate will be slightly lower.
Can You Defer Your Sallie Mae Smart Option Loan?
Yes, there are a few ways you can defer repayment. If you choose to begin repayment after you complete your undergraduate studies, there is a six-month grace period. Hopefully, this gives you time to get on your feet and find a steady job.
For students continuing their education in graduate school, you can defer payments for up to 48 months. Keep in mind that deferring repayment may provide you with additional time, but it also adds to the cost of your loan since interest continues to accrue.
While co-signers are sometimes important in securing student loans, you have the ability to release your co-signer when you’ve made 12 consecutive, on-time payments.
There is no prepayment penalty, but there are late fees. Missing a payment or consistently making payments after the due date can negatively impact your credit rating, so it’s best to enroll in an auto-draft payment plan to avoid additional fees.
Is the Sallie Mae Smart Option Student Loan Right for You?
Finding the right student loan for your or your family’s specific situation may take some time and research. Don’t worry about the process; our team at College Finance can help with all of your questions.
Keeping abreast of all the changes in federal and private student loan options is easy. Simply visit our website and we’ll guide you through the process. You’ll find many articles on how to plan, apply, and repay your student loans, as well as information on forgiveness options.
Since this is a presidential election year, we’ll even keep you updated on the student loan campaign platforms of all the major candidates.
Furthering your education should be a fun and worthwhile experience designed to produce multiple dividends throughout your life. Browse our latest guides and articles for the answers to any questions you may have.
