Rates on 10-year fixed-rate private student loans inched down last week. If you’re interested in picking up a private student loan, you can still get a relatively low rate.
According to Credible.com, from March 11 to March 16, the average fixed interest rate on a 10-year private student loan was 7.50%. It was 9.29% 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.
These rates are accurate as of March 11, 2024.
Related: Best Private Student Loans
Fixed-rate Loans
Last week, the average fixed rate on 10-year loans decreased by 0.84% to 7.50%. The week prior, the average stood at 8.34%.
Borrowers currently in the market for a private student loan will receive a lower 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 8.83%, 1.33% higher than today’s rate.
A borrower who finances $20,000 in private student loans at today’s average fixed rate would pay around $237 per month and approximately $8,488 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-rate Loans
Average variable rates on five-year loans moved up last week, from 7.18% on average to 9.29%.
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.
If you were to finance a $20,000 five-year loan at a variable interest rate of 9.29%, you’d pay approximately $418 on average per month. In total interest over the life of the loan, you’d pay around $5,079. Of course, since the interest rate 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
If you reach the annual borrowing limits for federal student loans or if you’re otherwise ineligible for them, private student loans may be a good option. But consider a federal student loan as your first option since the interest rates are typically lower. You’ll also receive more liberal repayment and forgiveness options with federal student loans.
To get a private student loan, you’ll generally need to apply directly through a non-federal lender. You can find private student loans through banks, credit unions and online entities. Nonprofit organizations, state agencies and colleges also offer loans.
It’s important to note that you’ll need a qualified co-signer if you have limited credit history, as undergraduates often do.
When applying for a private student loan, take into consideration the following:
- Your qualifications. Private student loans are credit-based. Lenders typically require a credit score in the higher 600s. This is where having a co-signer can be particularly beneficial.
- Where to apply. You can apply directly on the lender’s website, via mail or over the phone.
- 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
When comparing private student loan options, take a close look at the overall cost of the loan. This includes the interest rate and fees. It’s also important to consider the type of help the lender offers if you can’t afford your payments.
If you have good or excellent credit, you have a better chance at landing the best interest 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
Lenders offering private student loans generally offer both fixed and variable interest rates. These rates are, in part, based on your creditworthiness. Generally, the higher your credit score, the lower the interest rate you’ll receive. But credit history, income, the degree you’re working on and your career can factor into the interest rate you receive as well.
More From Advisor
- Student Loan Refinance Rates: March 19, 2024—10-Year Loan Rates Fall
- Colleges Begin Receiving Student FAFSA Information Following Months-Long Delay
- Private Student Loan Rates: March 12, 2024—Loan Rates Decrease
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