October 4, 2021 – Lending Rates Fall – Forbes Advisor
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The average interest rate on 10 year private fixed rate student loans fell slightly last week. For borrowers who take out personal loans to fill gaps in funding their higher education costs, interest rates remain relatively low for borrowers with solid creditworthiness.
According to Credible.com, the average fixed rate on a 10-year student loan from September 27 to October 1 was 6.18%. For a five-year floating rate loan, it was 3.36%. This applies to borrowers with a credit score of 720 or greater who have prequalified on Credible.com’s Student Loans Marketplace.
Related: The best private student loans
Fixed rate loans
Last week, the average fixed rate on 10-year loans fell 0.26% to 6.18%. The week before, the average was 6.44%.
Borrowers in the private student loan market can now receive a higher interest rate than they did last year. At that time last year, the average fixed rate on a 10 year loan was 5.21%, 0.97% below today’s rate.
According to Forbes Advisor’s student loan calculator, if you were funding student loans of $ 20,000 at today’s average fixed rate, you’d be paying about $ 224 per month and about $ 6,862 in total interest over 10 years.
Variable Rate Loans
The average floating rate on five-year loans fell 1.40% last week to 3.36%.
In contrast to fixed interest rates, variable interest rates fluctuate over the course of the loan term. Floating rates can start lower than fixed rates, especially during times when interest rates are generally low, but they can rise over time.
Private lenders often offer borrowers the option to choose between fixed and floating rates. Fixed rates may be a safer choice for the average student, but if your income is stable and you plan to pay off your loan quickly, it can be beneficial to choose a variable loan.
If you were to finance a $ 20,000 five-year loan at a floating rate of 3.36%, you would pay an average of about $ 363 per month. For the total interest over the life of the loan, you would pay about $ 1,755. Since the interest rate is variable, it can of course fluctuate up or down from month to month.
Related: How to get a private student loan
How Lenders Determine Your Interest Rate
Lenders who offer private student loans usually offer both fixed and floating rates. These prices are partly based on your creditworthiness. In general, the higher your credit rating, the lower the interest rate you will get. But credit history, income, the degree you’re working on, and your career can all all play a part in the interest rate you get.
How to get a private student loan
Private student loans can be a good option if you are reaching or otherwise not eligible for the annual federal student loan limits. You should consider a state student loan as your first option, as interest rates are generally lower and you’ll enjoy more generous repayment and waiver options than a personal loan. For example, the federal student loan interest rate for the 2021-22 school year is 3.73%.
Typically, when buying a personal student loan, you must apply directly through a non-state lender. These include banks, credit unions, nonprofits, government agencies, universities, and online businesses.
Keep in mind that students with poor credit scores often need a co-signer who can meet the lender’s credit requirements.
You should consider the following 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 over 600. For this reason, having a co-signer can be especially beneficial.
- Apply directly through lenders.You can apply directly on the lender’s website, by email, or by phone.
- Compare your options.Take a look at what each lender is offering and compare the interest rate, term, future monthly payment, commitment fee, and late payment fee. Also, check to see if the lender offers co-signer approval so that the co-borrower can eventually get out of the loan.
Comparison of personal student loans
When comparing private student loans, it is a good idea to look closely at the total cost of the loan. This includes interest and fees. It is also important to consider the type of help the lender is offering if you cannot afford your payments.
If you have good or excellent credit, you have a better chance of getting the best interest rates.
Experts generally recommend that you borrow no more than you will earn in the first year after college. While some lenders limit the amount of money you can borrow each year, others don’t. When comparing loans, consider how the loan will be paid out and what costs it will cover.