Private Student Loans
The Top 7 Criteria to Finding the Best Private Student Loans was our saving grace and can be yours as well.
Navigating the private student loans sector reminds me of trying to walk across a mine field blindfolded. This sector is overwhelming and if you don't know what to look for or what questions to ask, then you could be taken for a ride. Allow us to equip you with the necessary information, tools and definitions to help you walk across that field of private student loans with ease.
If you have not been introduced to private student loans before now, just understand that private student loans should not be your first option. Use it after you have exhausted all other avenues like scholarships, gifts and federal student loans.
As a borrower you need to become familiar with the following terms and understand the importance of the following Top 7 Criteria Needed to Finding the Best Private Student Loans:
Realize that these types of student loans are exactly like borrowing money from a bank for a car or house. That means your credit report will drive how much you can receive, what your interest rates will be and how long you can take to pay off your student loan.
In the private student loan sector a keen understanding of how your lender will determine your interest rates is critical. The two major index lenders use are the LIBOR index and the Prime lending rate.
The LIBOR index (London Interbank Offered Rate) starts with how much your lender has to pay on the money borrowed. Then they will add a buffer to it to help them make money. If you can find a rate that is LIBOR +2.8% that would be the same as the Prime lending rate at 0%. Keep in mind the prime at 0% is what the lenders would give the absolute best customers who have a high credit ranking.
Over the past several years the spread between the LIBOR and the Prime lending rate has increased which means it is better to go after the LIBOR because the interest rates move upwards more slowly, thus saving you more money on the entire loan.
***Private Student Loan Secret*** (updated: 12-08)
My oh my, have things changed recently. With the Federal Reserve cutting interest rates weekly, you best take some time to compare various rates. The Prime Lending rate is tied into the T-Bills and they are falling fast. This means that your interest rates will probably move almost as fast. This basically means you could easily find a better private student loan if it is based on the Prime Rate. Continue to watch the markets and definitely shop around.
Tips to Ease Your Private Students Loans Transition
Private Student Loans Secrets
***My Biggest Private Student Loan Secret***
On paper, make the lender show you the final bottom line. Have them show you how much you will borrow, add their interest rates, fees, etc and then show you how much your payments will be and how long they will last. Finally have them circle the final amount you will have paid when all is said and done. That number is what you should compare to other private student loans.
If you are like me, you are probably in total shock when you hear the words competitive rates and wonder how on earth 6.0% or even 8.0% is competitive. Especially when you see the federal reserve dropping interest rates down towards 0.0%. But in this game of finding student loans, I guess it is.
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