What Private Lenders Look For In Borrowers

  • Lenders’ requirements for private student loans differ from federal student loan requirements.
  • Private lenders typically look at your credit score, credit history, employment history, income, and debt-to-income ratio.
  • Every private lender sets their own requirements which can vary significantly from lender to lender.

The requirements for getting a private student loan are different from federal student loan requirements. One of the most notable differences between the two is that the federal government offers financial aid to students, regardless of their financial background. They only consider the applicant’s financial circumstances to calculate how much financial aid the individual is eligible for.

Private lenders, on the other hand, consider the applicant’s financial circumstances to determine their eligibility and also to determine the loan terms. The better your financial profile, the better the loan terms you may be eligible to receive.

The main thing that private lenders look for in borrowers is their financial profile. This includes your:

Dollar bill macro shot showing "US Treasury" print.

Flickr user Kurtis Garbutt

  • credit score and credit report
  • employment history
  • monthly income
  • debt-to-income ratio.

Some lenders may also have specific academic criteria such as minimum GPA or enrollment specifications. If you don’t meet the lender’s minimum loan requirements, your application could be rejected outright. Few lenders will approve your application if it doesn’t meet the minimum criteria but it will come at a higher interest rate to offset the higher risk of lending to you.

Here’s a more detailed look at what private lenders look for in borrowers to decide whether or not to approve your student loan application, and also to determine what rate of interest to charge you.

1. Credit Score & Credit Report

The first thing a private lender will check is your credit score and credit history. This detail tells them a lot about how you handle your finances your ability to make your payments on time.

Your credit score is a 3-digit number from 300 to 850 which indicates your creditworthiness. It is made up of 5 factors, each of which contributes a specific percentage to the total:

  • payment history (35%)
  • credit utilization (30%)
  • length of credit history (15%)
  • types of credit (10%)
  • new credit (10%).

Note that payment history has the highest impact on your total credit score. Even one late payment can damage your total credit score. Multiple late payments can pull your score down significantly.

A look at your credit score shows lenders that you are (or are not) making loan, credit card and other payments on time.

If you have a low credit score and unreliable payment history, they are more likely to reject your application.

What is a good credit score?

So, what is a good credit score for getting a private student loan? This may vary among lenders, but in general:

  • Poor score – 300 to 579.
  • Fair score – 580 to 669
  • Good score – 670 to 739
  • Very good score – 740 to 799
  • Exceptional score – 800 to 850

Most private lenders will reject your application if your credit score is 650 or lower. In general, the higher your credit score, the better your interest rate and loan terms will be.

In addition to credit scores, lenders will look at other factors to assess a borrowers ability to repay their loan as well.

2. Employment History & Steady Income

Employment history is an important factor for many lenders. They’ll want to review your employment history over the preceding 24 months as it will indicate steady employment.

Borrowers with steady income demonstrate that they can afford their loan payments and make those payments on time.

Your monthly salary can also be a determining factor. A higher income could mean that a borrower might be in a better position to afford their loan payments. Some lenders are specific about the minimum income requirements.

If you’ve changed jobs several times in the past two years, there is a risk you may not have any income coming in during the periods you are in between jobs. This can cause lenders to be more reluctant to approve your application. Even if they do lend you money, they could charge you a higher rate of interest to compensate for the higher risk factor.

3. Debt-To-Income Ratio

Your debt-to-income ratio also plays a key role in whether or not you qualify for a loan. Your debt-to-income ratio compares the amount you spend every month on necessities such as rent or mortgage payments and utilities versus the amount you earn every month.

Lenders may be more likely to approve your loan application if you have a low debt-to-income ratio, which indicates that your monthly income is higher than what you need to spend on necessities every month.

On the other hand, a higher debt-to-income ratio, may indicate you do not earn enough to cover your essential monthly payments, may put you in the high-risk bracket. Private lenders are generally more reluctant to loan you money. And those who do likely impose higher interest rates on the amount you borrow.

4. Academic Requirements

When you apply for a student loan, many private lenders will want to check your enrollment status as well as your academic progress.

Most will only approve your student loan application if you meet two basic academic criteria.

  1. You must be enrolled at least half-time in a degree-granting program at an accredited institution.
  2. Some lenders require that you have a minimum 2.0 GPA and meet the Satisfactory Academic Progress (SAP) as per your school guidelines.

As with all other criteria, this may vary from one lender to another so make sure to check each lender’s requirements individually.

5. Legal Borrowing Requirements

In addition to individual lender requirements, all private lenders must comply with certain U.S. federal and state laws related to student loans. Before approving your loan, most lenders will want to make sure that you meet these legal requirements:

  • Be a U.S. citizen or legal resident. Some private lenders will lend to international students, however, most will require a U.S. citizen as a cosigner though.
  • Must Be 18 years of age or older (or age of the state majority).
  • Must be enrolled at least half-time in a qualifying educational program.
  • Must use student loans for education-related expenses only.

What If You Don’t Meet Private Lenders’ Borrowing Requirements?

Few college students qualify for private student loans on their own. The vast majority are just getting started with building their credit, which is their biggest obstacle.

If you’re having trouble qualifying for a private student loan on your own, the best option is to apply with a creditworthy cosigner. A creditworthy cosigner could be any relative or friend who meets the lender’s minimum eligibility requirements in terms of credit, employment, and income.

When you apply with a cosigner, the lender will assess that individual’s financial profile. They will review your loan application based on your cosigner’s credit score and other financials.

It may be easier to get approved for a private student loan when you apply with a cosigner. However, it’s important to discuss with the cosigner their obligation to pay back the loan in the event that the borrower is unable to do so.

What To Look For When Choosing A Lender

Understanding what private lenders look for in borrowers is important to taking a out student loan. It’s also just as important to know what you should look for when choosing a lender.

Private lenders are not all the same. Every lender sets their own interest rate, loan terms and conditions, assorted fees, and even cosigner release conditions. With that in mind, you want to make sure that you choose a lender who is giving you the best borrowing conditions.

Consider these factors when shopping around for a private lender:

  1. Interest rate: The smallest difference in the interest rate can make a huge difference in the cost of the loan because of the total interest that accrues over the life of the loan. When comparing lenders, look for competitive interest rates.
  2. Minimum/maximum loan amount: Some lenders have minimum and/or maximum borrowing limits. Make sure the lender offers the amount you require.
  3. Easy cosigner release: At some time, you or your cosigner may want to be released from the contract. Most lenders will allow you to release your cosigner from the agreement after 24 on-time payments if you meet their requirements. Some lenders, however, don’t have a cosigner release option.
  4. Bonuses for autopay: Several lenders offer a 0.25% interest rate reduction to borrowers who set up automatic payments. This can save you a lot in accrued interest over the loan term. Choose a lender who offer these type of rate discounts.

Ready to apply for a student loan? Use College Raptor’s Student Loan Finder to discover personalized loans. Compare lenders and interest rates to find the ideal student loan for you!


Lender Rates (APR) Eligibility
Citizens logo.
6.36%-14.25%* Variable
4.48%-13.29%* Fixed
Undergraduate and Graduate
Sallie Mae logo.
6.37% - 16.70% Variable
4.50% - 15.49% Fixed
Undergraduate and Graduate
Credibe company logo.
4.98% - 16.70% Variable
4.09% - 15.71% Fixed
Undergraduate and Graduate
Lendkey company logo.
5.84% - 11.11% Variable
4.39% - 11.11% Fixed
Undergraduate and Graduate
Ascent company logo.
6.16% - 16.09% Variable
4.09% - 15.71% Fixed
Undergraduate and Graduate
6.54% - 11.08% Variable
3.95% - 8.01% Fixed
Undergraduate and Graduate
Earnest company logo.
5.62% - 16.20% Variable
4.11% - 15.90% Fixed
Undergraduate and Graduate
4.98% - 12.79% Variable
8.42% - 13.01% Fixed
Undergraduate and Graduate
College Raptor is not a loan lender and does not assume responsibility for suggesting a loan to a user who may not be eligible for it. Rates, terms, conditions, eligibility, approval, and other considerations are the decisions of the lenders and may vary depending on which lender or marketplace the user selects. We urge users to carefully consider and review all loan options and terms before committing to taking out a loan.