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Private student loan interest rate?

Interest rate increase on private student loan?

  • I applied for a sallie mae private student loan and got approved but it says that there is no limit to how much the interest rate can increase. Does that mean that the they would increase the interest rate absurdly high or will it stay somewhat reasonable?

  • Answer:

    Good question. Private lenders can generally charge whatever interest rate the market will bear. That is, if they continue to see increasing numbers of students coming to them for loans, they'll take from that that interest rates can be raised, raised at least until the number of students seeking a loan levels off or drops. Yes, they can remain "reasonable," or they can go "obscenely high." Such is capitalism. Question: have you applied for/made us of all federal student loans you're entitled to? Loans like a Stafford or Perkins (if you're eligible) or Parent PLUS? If you haven't, schedule an appointment with the friendly folks at your colleges' financial aid office. Remember, loans in general should be avoided when financing one's college education, but if they are absolutely necessary, stick to Stafford loans. Good luck.

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Private Student Loan: This type of loan is added up to enhance other Federal Student Loans and can be acquired through your college, financial institution, or lending facility. These are mostly used to take care of expenses that occur after your other student loan has been wiped out. When dealing with a private loan, it is important to understand that the terms associated with them can differ greatly from one institution to another. What they offer to you will also be greatly based upon your credit history report. If your credit is not the best, be aware you might be required to have a co-signer in order to move forward with it. Your interest rate associated with the loan along with any fees you will be required to pay will be determined by the lender. Many options can be made available to you by utilizing a Private Student Loan. You maybe able to receive additional benefits when dealing with this type of loan when you apply for a deferment of your loan amount. You could receive special reductions in your interest rate or even rebates. Hope this help.

Annielyn

The Sallie Mae private loan interest rates are based on the London Interbank Offered Rate (LIBOR). The current LIBOR as reported by the Wall Street Journal is readily available on the Internet. Your interest is technically listed as "LIBOR + (whatever percentage premium you were approved at)," so when LIBOR increases, your variable interest rate increases. In general, index interest rates (such as LIBOR) are low right now, and will increase with inflation over time. This is why it is important to make your payments, and then some. Please, do not utilize Sallie Mae's deferred payment option or their fixed $25/month option. Pay *at least* the interest every month while you are in school. The more you pay while in school, the better - especially while the interest is relatively low. If you receive a "refund" from your college, please carefully consider sending this money to Sallie Mae as payment on your loan. This is truly a "rice and beans until it's paid off" type of loan.

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