December 6, 2021 – Loan rate slip – Forbes Advisor
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10-year fixed-rate private student loan rates fell last week. If you want to take out a private student loan, you can still get a relatively low rate.
From November 29 to December 3, the average fixed interest rate on a 10-year private student loan was 5.48% for borrowers with a credit score of 720 or higher who prequalified in the student loan market. from Credible.com. On a five-year variable rate loan, the average interest rate was 3.76% among the same population, according to Credible.com.
Related: Best private student loans
Fixed rate loans
Last week, the average fixed rate on 10-year loans fell from 0.93% to 5.48%. The previous week the average stood at 6.41%.
Borrowers looking for a private student loan can now benefit from a lower rate than they would have at this time last year. At the same time last year, the average fixed rate on a 10-year loan was 5.49%, 0.01% higher than the current rate.
Let’s say you funded $ 20,000 in student loans at today’s average fixed rate. You would pay around $ 217 per month and around $ 6,023 in total interest over 10 years, according to the Forbes Advisor student loan calculator.
Variable rate loans
Average variable rates on five-year loans fell further last week to 3.76% on average from 5.91%.
Unlike fixed rates, variable interest rates fluctuate over the life of the loan. Variable rates can start off lower than fixed rates, especially during times when rates are generally low, but they can increase over time.
Private lenders often offer borrowers the option of choosing between fixed and variable interest rates. Fixed rates may be the safest bet for the average student, but if your income is stable and you plan to pay off your loan quickly, it might be beneficial to choose a variable loan.
If you were to finance a loan of $ 20,000 over five years at a variable interest rate of 3.76%, you would pay about $ 366 on average per month. In total interest over the life of the loan, you would pay approximately $ 1,970. Of course, since the interest rate is variable, it can go up or down from month to month.
Related: How to get a private student loan
How lenders determine your rate
Lenders offering private student loans generally offer fixed and variable interest rates. These rates are, in part, based on your creditworthiness. Generally, the higher your credit score, the lower the interest rate you will receive. But credit history, income, the degree you are working on, and your career can all factor into the interest rate you receive.
Obtain a private student loan
Before you turn to a private student loan, consider a federal student loan as your first option. Interest rates on federal student loans are generally lower – for example, for the 2021-2022 school year, the interest rate for federal undergraduate student loans is 3.73%. Federal student loans also tend to offer much more generous repayment and forgiveness options. Yet, if you’ve reached or aren’t eligible for federal student loan borrowing limits, private student loans may be a good solution.
When shopping for a private student loan, you will usually need to apply directly from a non-federal lender. This includes banks, credit unions, nonprofits, government agencies, colleges, and online entities.
It’s important to note that you’ll need a qualified co-signer if you have a limited credit history, as undergraduates often do.
Here is what to consider when applying for a private student loan:
- Make sure you qualify.Private student loans are credit-based, and lenders typically require a credit score of around 600. This is why having a co-signer can be particularly beneficial.
- Apply directly to lenders.You can apply directly on the lender’s website, by mail or by phone.
- Compare your options.See what each lender is offering and compare the interest rate, term, future monthly payment, origination fees, and late fees. Also check to see if the lender offers a co-signer discharge so that the co-borrower can potentially opt out of the loan.
Buy private student loans
When shopping for a private loan, consider the overall cost of the loan, including the interest rate and fees. You can also consider the type of help that each lender offers if you are unable to make repayments on your loan.
Remember, those with good or excellent credit usually get the best rates.
Experts generally recommend that you borrow no more than what you will earn in your first year out of college. While some lenders cap the amount of money you can borrow each year, others don’t. When you compare loans, determine how the loan will be disbursed and what costs it covers.