Rates on 10-year fixed-rate private student loans slipped last week. Despite the rise, if you’re interested in getting a private student loan, you can still get a relatively low rate.
According to Credible.com, from November 7 to November 12, the average fixed interest rate on a 10-year private student loan was 7.62%. It was 6.12% on a five-year variable-rate loan. That’s for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace.
Related: Best Private Student Loans
Last week, the average fixed rate on 10-year loans decreased by 0.09% to 7.62%. The week prior, the average stood at 7.71%.
People are also reading…
Borrowers in the market for a private student loan now can receive a higher rate than they would have at this time last year. At this time last year, the average fixed rate on a 10-year loan was 5.88%, 1.74% lower than today’s rate.
If you were to finance $20,000 in student loans at today’s average fixed rate, you’d pay around $239 per month and approximately $8,639 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Average variable rates on five-year loans moved down last week to 6.12% on average from 8.37%.
In contrast to fixed rates, variable interest rates fluctuate over the course of a loan term. Variable rates may start lower than fixed rates, especially during periods when rates are low overall, but they can rise over time.
Private lenders often offer borrowers the option to choose between fixed and variable interest rates. Fixed rates may be the safer bet for the average student, but if your income is stable and you plan to pay off your loan quickly, it could be beneficial to choose a variable loan.
Let’s say you financed a $20,000 five-year loan with a variable interest rate of 6.12%. You’d pay about $388 on average per month. You’d pay approximately $3,266 in total interest over the life of the loan. Keep in mind that since the interest is variable, it could fluctuate up or down from month to month.
Related: How To Get A Private Student Loan
How To Get a Private Student Loan
Before you look to a private student loan, consider a federal student loan as your first option. The interest rates on federal student loans are generally lower. Federal student loans also tend to have far more generous repayment and forgiveness options. Yet, if you’ve reached the borrowing limits for federal student loans or if you’re ineligible for them, private student loans can be a good solution.
Getting a private student loan generally involves applying directly through a non-federal lender, such as a bank, credit union or online entity. You may also be able to get a private student loan through a nonprofit organization, state agency or college.
It’s important to note that you’ll need a qualified co-signer if you have limited credit history, as undergraduates often do.
Here’s what to consider when applying for a private student loan:
- Make sure you qualify. Private student loans are credit-based, and lenders typically require a credit score in the high 600s. This is why having a co-signer can be particularly beneficial.
- Apply directly through lenders. You can apply directly on the lender’s website, via mail or over the phone.
- Compare your options. Look at what each lender offers and compare the interest rate, term, future monthly payment, origination fee and late fee. Also, check to see if the lender offers a co-signer release so that the co-borrower can eventually come off of the loan.
Shopping for Private Student Loans
First, take a look at the loan’s overall cost. Consider both interest rate and fees. Also, look at the type of help each lender offers if you’re not able to afford your payments.
Remember, those with good or excellent credit typically get the best rates.
How much should you borrow? Experts generally recommend borrowing no more than you’ll earn in your first year out of college. How much can you borrow? Some lenders cap the amount you can borrow each year, while others don’t. When you’re shopping around for a loan, take to lenders about how the loan is disbursed and what costs it will cover.
How Your Interest Rate Is Determined
The rate you receive depends on whether you’re getting a fixed or variable loan. Rates, in part, are based on your creditworthiness—those with higher credit scores often get the lowest rates. But your rate is based on other factors as well. Credit history, income and even the degree you’re working on and your career can play a part.