Want to find a student loan – compare now!
August 26th, 2014 by Jennifer Frankel
Some of you may have already started school, while others of you will beginning in the next couple of weeks. If you still need help funding your education, student loans are still available. If you are considering applying for a student loan, it’s important that you compare your options to find the one that is right for you. To help you do this, we would like to present you with a list of things to consider when comparing student loans:
The interest rate you are offered by each lender is probably the most important point of comparison. However, don’t simply go with the lender that offers you the best rate. It is important to look at all the terms and conditions associated with the loan to make sure you choose the best option. For example, you might be offered two different loan packages, one with 9% and another with 10%. However, the 9% rate is a variable rate and the 10% is fixed. In this instance, a student might choose the 10% option knowing that the rate will never go up. However, another student might choose to risk having their rate go up in the future for the lower rate now. One way to make this decision is to see what sort of formula the lender uses to determine your variable rate.
If you plan to take a full course load and you know you won’t have time to work in order to make your monthly payments, you might actually consider taking a loan with a higher interest rate. While you will certainly pay more over time with this option, it might be worth it if you know you would struggle to make your monthly payments while in school. Another thing to consider regarding the repayment schedule are whether you are required to pay interest while in school.
Many lenders offer similar repayment options as government loans, but be sure to look at the various plans that are available to you.
- Is there an income-based repayment option in case you have a financial hardship?
- Can you defer your loans if you decide to go back to school?
These are important questions to ask even if you don’t think you will need to apply for a different repayment plan or for a deferment. Again, you might consider a loan with a higher interest rate if that lender gives you more flexible repayment options. Finally, you might compare lenders based on the method of payment. If you have to pay by check and online payments aren’t an option with a certain lender, then you might consider going with the lender that offers various repayment options.
Most private lenders charge an origination fee, which is added to the principle of the loan, or the total amount you need to repay. Compare the origination fee (which is usually a percentage of the borrowed amount) with the interest rate. You can use a loan calculator to compare the total cost of two loans with different interest rate and different origination fees. Be sure to also compare the lenders based upon other fees such as a fee for going into deferment, a fee for paying off the loan early, or penalties for late payments. Taking into consideration all of these different fees, a loan with a higher interest rate might actually end up costing less in the end.
Some lenders give borrowers certain perks or benefits in order to get your business. These benefits can range from a reduced interest rate for paying on time or via direct debit, a small bonus such as $50 in your bank account. Although the benefits don’t tend to fantastic, if you have two lenders competing for your business that are offering similar terms, a small bonus might be the thing that makes the difference between the two.