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The average interest rate on 10-year fixed-rate private student loans rose last week. For borrowers seeking private loans to fill the gaps to pay for higher education, interest rates remain relatively low for fixed credit borrowers.
From April 11 to April 15, the average flat rate for a 10-year private student loan was 5.39% for borrowers with a credit score of 720 or higher who qualified for the Credible.com student loan market. In a five-year floating rate loan, the average interest rate was 4.11% in the same population, according to Credible.com.
Related: Best Private Student Loans
Fixed rate loans
Last week, the average fixed interest rate on a 10-year loan rose 0.52% to 5.39%. The average was 4.87% last week.
Borrowers in the market for a private student loan can now receive a lower interest rate than they would have at this time last year. Last year at this time, the average fixed interest rate for a 10-year loan was 6.12%, 0.73% higher than the current interest rate.
If you were to finance $ 20,000 student loans at the current average fixed interest rate, you would be paying about $ 216 a month and about $ 5,916 at a total interest rate for 10 years, according to the Forbes Advisor Student Loan Calculator.
Variable rate loans
Last week, interest rates on variable five-year student loans moved higher, reaching 4.11% from 3.91% last week.
Unlike fixed interest rates, variable interest rates fluctuate during a loan period. Variable interest rates may start lower than fixed rates, especially during periods when interest rates are generally low, but may increase over time.
Private lenders often offer borrowers the opportunity to choose between fixed and variable interest rates. Fixed interest rates may be the safest bet for the average student, but if your income is stable and you plan to repay your loan quickly, it might be beneficial to opt for a variable loan.
Suppose you finance a $ 20,000 five-year loan with a floating interest rate of 4.11%. You would pay about $ 369 per month on average. You would pay about $ 2,159 in total interest over the life of the loan. Keep in mind that since the interest rate is variable, it could fluctuate up or down from month to month.
Related: How To Get A Private Student Loan
How To Compare Private Student Loans
First, take a look at the total cost of the loan. Take into account both the interest rate and the commissions. Also, consider the type of assistance each lender offers if you are unable to afford your payments.
Remember, those who have good or excellent credit usually get the best prices.
How much should you borrow? Experts generally recommend borrowing no more than what you earn in your first year of college. How much can you borrow? Some lenders limit the amount you can borrow each year, while others do not. When shopping for a loan, inform the lenders about how the loan will be disbursed and the costs it will cover.
Obtaining a Private Student Loan
If you reach the annual lending limits for federal student loans or if you do not meet the criteria for them, private student loans can be a decent choice. But consider a federal student loan as your first choice, as interest rates are usually lower. For example, the interest rate for federal undergraduate student loans is 3.73% for the 2021-2022 school year. You will also receive more liberal repayment and forgiveness options with federal student loans.
When purchasing a private student loan, you should generally apply directly through a non-federal lender. This includes banks, credit unions, nonprofits, government agencies, colleges and online entities.
If you are an undergraduate with a limited credit history, you should generally apply with a co-signer who can meet the lender’s borrowing requirements.
Here are some things to keep in mind when applying for a private student loan:
- Make sure you meet the requirements.Private student loans are credit based and lenders usually require a credit score in the high 600s. This is why having a co-signer can be so beneficial.
- Apply directly through the lenders.You can apply directly on the lender’s website, by mail or by phone.
- Compare your options.See what each lender has to offer and compare interest rate, duration, future monthly payment, origin fee and late payment fee. Also, check to see if the lender is offering a co-signer release so that the co-borrower can finally get out of the loan.
The percentage you will receive
Lenders offering private student loans generally offer both fixed and variable interest rates. These interest rates are based, in part, on your creditworthiness. Generally, the higher your credit score, the lower the interest rate you will receive. But your credit history, income, degree and career can also affect the interest rate you receive.