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The average rate on 10-year private fixed-rate student loans fell last week. For borrowers seeking personal credit to fill gaps in funding college education costs, interest rates remain relatively low for borrowers with solid creditworthiness.
The average fixed rate on a 10 year student private loan was 5.61% from September 13 to September 17. This applies to borrowers with a credit score of 720 or greater who have prequalified on the Credible.com marketplace for student loans. The average interest rate on a five year floating rate loan was 3.19% for the same population, according to Credible.com.
Related: The best private student loans
Fixed rate loans
The average fixed rate on 10-year private student loans fell 0.50% to 5.61% last week. In the previous week, the average was 6.11%.
Borrowers in the student loan market can now receive a lower interest rate than they were last year. At that time last year, the average fixed rate on a 10-year loan was 6.45%, 0.84% ââabove 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 $ 218 per month and about $ 6,177 in total interest over 10 years.
Variable Rate Loans
Last week, the five-year variable student loan interest rate rose to 3.19% from 3.12% the previous week.
In contrast to fixed interest rates, variable interest rates fluctuate over the term of the loan. 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 the safer choice for the average student, but if your income is stable and you plan to pay off your loan quickly, then it can be beneficial to choose a variable loan.
If you were to fund a $ 20,000 five-year loan at a floating rate of 3.19%, you would pay an average of about $ 361 per month. For the total interest over the life of the loan, you would pay around $ 1,664. 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%.
Generally, to get a personal student loan, you must apply directly through a non-state lender such as a bank, credit union, or online business. You may also be able to get a private student loan through a nonprofit, government agency, or college.
Keep in mind that students with bad credit often need a co-signer who can meet the lender’s credit requirements.
When applying for a personal student loan, consider the following:
- your qualifications. Private student loans are loan based. Lenders typically require a credit rating in the higher 600s. This is where it can be particularly beneficial to have a co-signer.
- Where to apply. You can apply directly on the lender’s website, by email, or by phone.
- 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.
Shopping for private 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.
How Much Should You Borrow? Experts generally recommend not borrowing more than you will earn in the first year after college. How much can you borrow? Some lenders limit the amount you can borrow each year while others don’t. When looking for a loan, find out from the lenders how the loan is paid out and what costs it covers.