LOW INTEREST STUDENT LOAN: A More Affordable Alternative

2007-03-08 10:33:40

( Financial )



Getting approval for your loan application may have been easy, but finding and nailing a low interest student loan can be more of a challenge. Hence, it is advisable that you survey the several types of loan available in the market before you acquire a student loan.

Generally, education loans are either federal or private loans. Among the two loan types, federal loans are more often classified as low interest student loans. Federal loans can be categorized as subsidized or unsubsidized. Subsidized federal loans are low interest student loans that allow for longer repayment periods. The interest charges for subsidized loans are deferred until the repayment period begins while interests for unsubsidized loans are charged immediately.

You are allowed to acquire several student financial aids to cover your educational expenses. These student loans have individual interest rates. While the repayment fees may seem to be affordable individually, time may come when the sum of all your monthly repayment bills would take its toll on your monthly income. When this happens, you may consider striking a low refinance deal with a lending company.

The main objective of refinancing your student loans is to lower your monthly repayment fees. This is normally done through low interest consolidation. When you consolidate your loans, the loans are paid in full by the consolidating party and all of your loans are combined to form a new loan which amounts to your previous loans’ sum. The interest rate applied is the weighted average of all the rates for the consolidated loans.

Since federal loans have much lower interest rates than private ones, it is advisable to consolidate your federal loans into one account and all your private ones into another. Otherwise, you may end up paying a higher interest rate on the combined principal amount than you would for two separate loans.

There are two ways a low refinance deal can lower your monthly repayment fees. It can either give you lower interest rates or it can provide for longer repayment period. Consider though that a longer repayment period may mean a higher interest rate for you. Having to choose between the two, it is always better to have lower interest rates since, at the end of the day, it still means less debt for you.


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