Find The Best Student Loan Interest Rate
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When choosing the best loan for you, you need to take into consideration the student loan interest rate to ensure that you will pay back as little as possible in accrued interest. Student loan interest rates differ depending on the type of loan you have and can fluctuate from year to year.
All Stafford loans have fixed interest rates, and they now stand at about 5.6% and until 2012 are set to drop to 4.5% and 3.4%. Private loans on the other hand are not fixed, so you have to find one that has a good APR, or annual percentage rate. These loans are variable, so you can start out with a low rate and have it increase or decrease based on the London Interbank Offered Rate index (LIBOR) or the prime rate.
Until December of 2009, the LIBOR index rate is at .30% which is the margin that variable interest rates will increase by. A good private school loan interest rate can originate at about 1% and then vary based on the prime rate or LIBOR, and all variable interest rates are dependent on your personal credit history, or that of your co-signer.
If you have multiple federal loans, a smart way to get the best student loan interest rate is to consolidate them into one loan with one payment. Your student loan consolidation interest rate will then be the weighted average of all your federal loans, rounded up to 1/8%. This will result in a lower overall interest rate that will apply to your entire loan amount.
On top of federal loan consolidation, there is an advantage to consolidating private loans as you are likely to get better student loan consolidation interest rates. If you consolidate your private loans and your credit is better at the time of consolidation than it was when you were approved for the loan, or you take on a co-signer at that point, you could qualify for a lower interest rate.
Usually when you take on a loan and sign a promissory note, that requires you to be locked into the fixed rate or variable system of the contract, but you could always appeal to your lender and ask if, for example, you make automatic payments, you can qualify for a lower interest rate.
The student loan interest rate you get greatly impacts how easy your loan will be to pay off. Be careful when you first get your loan to read your contract well and understand what your interest rate is and how it will accrue. You do have options to later try to reduce it, but they are few, so the best bet is to select the best interest rate you can from the onset.
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