Opting for higher education is a dream for many young adults. It could help you secure a well financial being in the future. But just like anything else, it comes with a price. If the government of the country you live in offers free education, then you are pretty much good to go. But not many students are fortunate enough to have such opportunities. Some families with higher incomes can afford to help their children with their education fees. But since you are reading this article, you can try to take care of your education fees by yourself. That is all good said than done because student loans can be a short term solution that can cost you lots of money in the long run. By the end of this article, you will hopefully have some idea of identifying low interest student loans and continue chasing your educational dreams.

Low Interest Student Loans

The institution offering the loan are lenders. They could be banks, credit unions, borrower schools, some private institutions, or even the United States Department of Education, depending on where you live. These lenders set interest rates. Most loan lenders charge interest for borrowing money. Interest rates are calculated as a percentage of the original amount taken. If the loan is subsidized, you can be elected not to pay all of the interest. Unsubsidized loans can, however, result in you paying all of the interest put upon the original amount of money borrowed. It becomes necessary for you to compare different interest rates when looking for low interest rate student loans.

Because different loan lenders offer different rates for their loans. Looking at private student loan annual percentage rates (APR) is an excellent way to compare different interest rates. Annual percentage rates reflect the student loan’s actual cost; they show you capitalized interest, origination fees, accrued interests. 

Government set student loan interest rates

low interest student loansFederal student loan interest rates are standardized and set by the government. Every student eligible for this federal student loan has the same interest rate. These rates, however, can change annually. Because of swinging interest rates, it is wise to know the exact interest rate for a student loan before actually acquiring it. You can even calculate the accruing interest rate yourself using a new formula. Amount of Interest= (the outstanding principal balance times the interest rate factor) times the number of days since the last payment.

The interest rate factor in the formula calculates the accumulating interest amount. To determine it, you should divide the loan’s interest rate by the number of days in a year. Students can also save on low interest student loans by consolidating. The process of student loan consolidating allows the loan taker to combine their many federal loans into a single loan. It makes it easier for the student because they have to pay one monthly payment rather than paying for multiple loans. If you are lucky, you might even be eligible for student forgiveness programs and loan repayment plans.

Private loan givers

Because loan lenders can decide on how much interest rate they can charge, there is lots of variation in rates in the private loan sector. Low interest student loans can be found in this sector if you research enough. Some individual loan givers can also set their terms and requirements, which may need you to have a cosigner. This makes it essential to do thorough research to find low interest rate student loans. The average bar for most loan lenders is around 4 to 13 percent, but fluctuating rates and credit scores can impact the actual interest rate you pay. Low-interest rates can seem appealing but do not get your hopes high because, most of the time, you are not qualified for it.

It should also be noted that private student loan lenders pose more risks to students than government loans. The reason for this is, federal student loan programs include protection plans like income-based payment and student loan forgiveness plans. Most private student loan lenders do not include such programs. But let’s not all stomp individual lenders. Because if you use all of your federal student loan options, and you still need money for your education, private student loans can help you fill in the gap. You can also refinance with your individual student loan giver to get better interest rates. 

Signing up for autopay

Some private and federal loan lenders offer an additional 0.25 percent point interest reduction for loan takers that sign up to have monthly payments automatically withdrawn from their bank accounts. Keep an eye out for advertisements that already include autopay discounts in the rate ranges advertised. Besides the percentage benefit, autopay can help you sleep at night better, knowing that you have not missed your payments and that it has been automatically deducted. 

Knowing the loan term’s impacts

best student loan consolidationInterest rates determine the amount of money you are paying back for your loan. But do not forget the amount of time you are taking the credit for. It may seem like a relief knowing that you can take the loan for extended periods, but in the end, it may end up costing you double! Six to twelve-year plans may seem like you are paying a high amount, but in the process, you end up paying them off faster and with less interest. An extended twenty-year payment plan may seem lighter on your bank account, but in the end, you may end up paying tens of thousands of dollars more than what you had originally due to accruing rates. The key is to understand how an interest rate will impact your overall debt. Keep this in mind when shopping for low interest student loans. 

Co-signer

Do you know the saying, “He who goes to hell is looking for a buddy”? Well, this is kind of like that, but don’t worry, you are not going to hell. It’s just that if you have bad credit or do not have high enough and stable income, you are better off looking for a co-signer. Your co-signer should have a good credit score and a steady income. Because they will be liable to make payments on your behalf if you do not. But your cosigner should not be afraid, because most loan lenders have a co-signer release form that allows your partner to leave after you have made payments on time for a while. 

Low interest student loans are a dream for many students. They can mean a successful education for students who are not doing well finance wise. Student loans can also be a means of imprisonment for those who do not consider their options. Make sure to do your research well before signing a loan contract. Read it thoroughly. Look into Federal student loans and private ones. Neither has to be better than the other because interest rates can vary depending on the person. Never opt for the lowest monthly payment, consider the long term impacts. Apply for student loan consolidations. There are many options to discover in the low-interest rate student loans world!