Student Loan Prequalification: What It Is And How To Get It

If you’ve been shopping around for private student loans, you might have been prompted to prequalify with lenders you’re interested in. That’s generally good advice to follow, but it’s important to understand why.

Here’s how student loan prequalification works and how it can help you score the best possible deal on your education debt.

What Is Student Loan Prequalification?

When you apply for a private student loan, the lender will determine your interest rate by checking your credit score and financial history. If you have a high credit score, you can likely qualify for a lower interest rate. Applicants with a low credit score, however, will receive a higher interest rate or may not be approved for a student loan at all.

When you submit a student loan application, most lenders run a hard credit check to verify your financial history and creditworthiness. A hard credit check shows up on your credit report and can result in a slight dip in your credit score.

To help you avoid submitting multiple applications to lenders you may not be approved for, you can instead opt to prequalify for a student loan. When you prequalify, you enter a few basic details about yourself and the lender instantly shows you the estimated interest rates and terms you could qualify for. Importantly, prequalifying only results in a soft credit check, which won’t affect your credit score.

By prequalifying with multiple lenders, you can get a sense of which companies will work with you and what rates they offer. By better understanding your options and narrowing down the list of your top lenders, you can reduce the number of loan applications you have to submit.

4 Benefits of Prequalifying for a Student Loan

1. See Estimated Rates and Loan Terms

The biggest benefit of prequalifying is that you can view your estimated interest rate and repayment terms. This can help you decide which lenders you want to submit a full application with.

Student loan lenders often advertise a wide range of interest rates, and you may assume that you’ll qualify for their lowest advertised rate. But those are usually reserved for borrowers with excellent credit, high income and few debts. Prequalification shows the rates you may actually qualify for—which may be higher than you anticipated.

This is a useful tool to help you compare potential lenders. However, the interest rate you prequalify for is simply an estimate; the final rate you receive once you’ve submitted a full application may be different.

2. No Hard Credit Check

Notably, prequalifying for a student loan doesn’t incur a hard credit check. This means you can view estimated interest rates without dinging your credit.

In addition to preserving your credit score, having too many hard credit checks in a short window may be a red flag to future lenders. Hard inquiries remain on your credit report for two years. By minimizing your number of inquiries, you could appear to be a safer borrower to future lenders.

3. Compare Lenders You’re Eligible for

When you prequalify for a student loan, you can see if you’re eligible to borrow money through a certain lender at all. Prequalifying saves you the hassle of filling out a full application if you’re unlikely to be approved.

By weeding out incompatible companies, you can save time and maximize your chances of finding a competitive loan.

4. Determine If You Need a Co-signer

Many student borrowers find it difficult to borrow a loan on their own; adding a co-signer can help them qualify or get better interest rates. However, including a co-signer comes with its own pros and cons, so it’s a decision that should be considered carefully.

When you prequalify for a student loan, you can choose to include only your information to determine if you can qualify without a co-signer. If the lender says you’re not eligible for a loan or you only qualify for higher interest rates, then you can often add a co-signer to the prequalification tool. This allows you to compare your options and see if a co-signer is necessary before submitting a full application.

Not all lenders allow co-signers on student loans, so if it’s important for you to have one, be sure to factor that into your search criteria.

How to Prequalify for a Student Loan

Many (but not all) private student loan lenders allow you to instantly prequalify on their site. Here’s what to do.

  • Visit the lender’s website. Make a list of the lenders you’re interested in and see if they offer prequalification. On their websites, you might see a button that says “Prequalify now” or “Check your rate.” If you see language that says the lender won’t run a credit check, that usually means you can prequalify.
  • Input your information. Each lender requires different personal details, but expect to provide your name, email address, annual income and loan amount. You may also be asked about where you’re attending college and what you intend to major in. Sometimes, you’ll have to input your credit score. Be as precise as possible when submitting your information, otherwise the rates you prequalify for may not be accurate.
  • View your results. Prequalification usually only takes a few minutes from start to finish. Once you’re prequalified, the offer may only be available for a limited time. Note how long you have before making a final decision and submitting an application.

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