Private student loan rates have come down. What to know before getting one

Be sure to shop around for the best rates on private student loans.

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Private student loan rates fell slightly: for 10-year fixed-rate loans, average rates reached 6.38% for the week ending July 5, while for 5-year variable-rate loans, rates fell more dramatically, from 4.31% to 3.96%. , according to data from Credible. Of course, the rates you’ll pay depend on factors such as the lender you choose, the type of loan (fixed or variable rate), and your credit score. Check here for the lowest private student loan rates you could qualify for.

There are two main types of student loans: federal loans, which are issued and funded by the federal government, and private loans, which are issued by private financial institutions like banks. Federal student loans have fixed interest rates and private student loans can have a variable or fixed rate.

“I always recommend that students take federal loans first before looking to private student loans,” Mark Kantrowitz, student loan expert and founder of PrivateStudentsLoans.guru, told MarketWatch Picks recently. This is because federal loans typically have more favorable repayment terms (such as income-driven repayment plans), loan forgiveness, and other perks.

That said, if you’ve been able to maximize your federal student loans and still have debt, private student loans can help fill in the gaps in your funding. Plus, if you have great credit or have a co-signer with great credit, you can likely take advantage of competitive interest rates, which can sometimes make private student loans more affordable than public loans. Check here for the lowest private student loan rates you could qualify for.

It is essential that you seek out a private student loan to get the best rate possible. As Picks recently reported, “Unlike federal loans, private loans can offer a variable rate. That may sound tempting because starting rates can be lower than fixed rates, Kantrowitz said. But they may start to increase over the life of the loan, which could increase the cost of that loan over time, and therefore your monthly payment could increase. “The only time I would recommend a borrower get a variable rate right now is if they are able to repay the loan and fully intend to do so before interest rates set. increase too much,” he said.

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