Have Private Student Loans Changed in 2009 Ask These 7 Questions Before You Decide
Navigating the private student loans sector reminds me of trying to walk across a mine field blindfolded. You'd think that the interest rates for private student loans would be dropping since the prime rate is or at near zero. Nothing is further from the truth.
Re-read this article many times, take notes and use this criteria the next time you sit down and discuss private student loans with your lender. Please make your lender explain the following terms that will be used a lot.
1. Which index will you be using to determine my interest rate. The two major index lenders used to determine your interest rates are the LIBOR index and the prime lending rate. Make them show you why the rate they use is better than the other one.
The LIBOR index (London Interbank Offered Rate) starts with how much your lender has to pay on the money borrowed. Then they will add a buffer to it to help them make money. Over the past several years the spread between the LIBOR and the Prime lending rate has increased which means it is better to go after the LIBOR because the interest rates move upwards more slowly, thus saving you more money on the entire loan.
However as you have read in the papers and heard on TV, interest rates are falling so that is why you need them to compare both methods.
2. How much will my co-signers credit rating influence the interest rate?
Most college student use their parents or other family member as their co-signer. If you are going to shop for the best interest rates you should also shop for the best co-signers. They can either make or break you.
3. What fees are associated with this loan?
Lenders are notorious for adding fees to the loans. Application fees are the most common fees. Any fee that falls in the range of 3% to 4% is just about the same as adding 1% to your interest rate.
4. Can I repay this loan faster and exactly what are your payment options?
Any time you owe money and interest accrues you need to eliminate that debt as soon as possible. Some private lenders want to squeeze all the money they can out of that loan. The only way they can do that is by charging you a fee for paying off your student loan early. A good lender will provide several options to meet your repayment needs.
5. Can I get a graduation discount?
If you show proof that you graduate, some institutions will offer you a discount on your student loan.
6. What kind of tax break can I expect?
Once you begin to pay off your student loans you will be able to write off the interest on your student loans. For my nephew it is substantial. Make sure and have your lender show you these advantages and combine them with this next question.
7. Please show me on paper, exactly how much I will be paying by the end of my loan.
These pieces of paper will helped us tremendously when it's time to finally make a decision on who we borrow money from. You'll love the ease of comparing when you have each paper sitting side by side.
A few other facts you should know:
use private student loans as a last resort after you have failed to get a federal student loan.
these loans are also good as a supplement but only borrow what you absolutely need.
they are not your last option when it comes to finding a student loan, but they are better than the other options available to you.
once you are approved for the loan you can expect to see the money in as little as 14 days.
unlike federal student loans, you don't have apply through FAFSA first, you can get these loans at any time.
Article Title : Have Private Student Loans Changed in 2009 Ask These 7 Questions Before You Decide
At, EdFed, we proudly introduce 'articles on student loans' and 'Learnal - the journal to learn from', our free newsletter on student loan management, which is sure to keep you informed of the latest events and happenings in the student loan market. To receive your copy of the above just use the RSS feed below and add this to your "My Yahoo", blogs, newstickers, and other similar channels accepting distributable content.
Click here to sign up for our Weekly Newswire now!
How EdFed Helped others!
The loan representative assisting me with my consolidation made the entire process clear. I understood everything thanks to his excellent service. - Wendy M. Minneapolis, MN
Student Loan Consolidation Info - How to Choose the Right Loan Company
The Career Resources column is presented by Granted, America's leading job search engine dedicated to getting people jobs.
Education is one of the most basic right of any human, but with the increase in prices and the costs involved in education this has made these rights turn into a privilege which very few can enjoy. Any normal person today in the whole of United States has to take an education loan at one point of time to pay for their education fees.