Student Loans Insight

College Loan Interest Rates
by Amie Hall, Student Loans.Net

If you are getting ready to take out one or more bank student loans to pay for your college education, you should understand how interest rates work. Interest rates are charges you pay as a borrower. Interest rates can be found on student credit cards, home mortgages, car loans, and private loans. In short, lenders make their money through the interest rates they charge you to borrower their money. For example, if you borrow $100 at 10 percent interest, you pay the lender back $110.

The United States Federal Reserve dictates interest rates in the U.S. The Reserve serves as the central bank for the country. The current prime rate is in the 7.25 percent range. This rate is reserved for borrowers who demonstrate an excellent credit history and ability to repay.

The issue of interest rates really comes into play when a student is considering student college loans offered through a private lender. Unlike federal student loans, private loans usually require a credit check. If the student does not have a strong credit history, this can affect the interest rate of the loan. The poorer the credit score, the higher the interest rates. This translates into the borrower paying more to borrow money. Borrowers with poor credit do have the option of applying with a well-qualified co-signer who can help increase the chances of a lower interest rate.

Because interest rates determine how much you will pay back in college loans, it’s a good idea to shop around for the best rates and repayment program. There is an array of private lenders to choose from. You can visit private student loan.org for more information on private student loans.

Interest rates are also important to watch in regards to federal loans. While federal financial aid offers low-interest loans that are regulated by the government, the rates can fluctuate if you want to refinance student loans after you have left college. The rate you refinance at will depend highly upon when you do it and which lender you refinance with.

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This entry was posted on Monday, January 7th, 2008 at 6:20 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.