Most student loan programs work with only fixed rate student loans. Many borrowers also opt to consolidate their student loans to a single fixed rate as well. A fixed rate loan is definitely the most common choice for borrowing students. There are options for varying rate student loans or partially varying rate student loans as well. This article will discuss fixed rate student loans and what makes them especially beneficial and effective.
The Benefits of Fixed Rate Student Loans
As the economy is constantly changing, private lenders and creditors do whatever it takes to keep up. Therefore, when you are considering taking a student loan from a private money agency, you need to keep in mind that they are able to modify the interest rates as it suits them. However, these changes may not always be beneficial for you, since you take the risk of not being able to afford making the payment on the due date.
The main benefit of a fixed rate student loan is that the interest rate never fluctuates. Fixed rate student loans will also feature the same pre-determined interest rate for the lifetime of the loan. This means that you will already know the amount of interest that must be paid back while paying off the loan. This is very advantageous over a varying interest rate student loan as you do not have to worry about an increase in the interest rate. A student loan with a varying interest rate may bee financially beneficial, but this is not guaranteed. Borrowers mostly benefit from a fixed rate student loan as their monthly payments will always be the same amount. This makes calculating the amount that must be put towards paying off the loan much easier. This also means that you can determine how long it will take you to pay off the student loan. The only downfall with a fixed rate student loan is that it could be more costly if the interest rate goes down at some point.
Fixed rates loans provided by government agencies are the best way to ensure that the terms and conditions originally negotiated will not be modified. This way, you can get a sense of security that you will not enroll in a payment plan that can have a potential negative impact on your credit history and FICO. Furthermore, keep in mind that not even filing for bankruptcy can waive the student loan debt, thus you will need to consider the repayment plan carefully.
Whilst you are in college, your main focus should be studying, in order to achieve the education that will boost your chances to follow a successful career in a domain of your choosing. Therefore, you will most likely not have time to get a job in order to address any increased changes in the rates of the student loan, once they occur. Obtaining a fixed rates loan with a government agency means you will not need to feel any stress worrying about an increase in fees, which can change any day. You will be able to finish your education with peace of mind.
The Best Fixed Rate Student Loans
Two of the best fixed rate student loans that are available are the Perkins student loan and Stafford student loan. Both are offered through federal student loan programs. The Perkins student loan features a fixed interest rate of 5%. The Stafford student loan features a fixed interest rate of 6%. There are other fixed rate student loans available as well, mostly through private lenders, but these are two lower rate fixed student loans.
Choosing a Fixed Rate Student Loan
When looking to find a student loan to apply for you should not just consider the interest rate of the loan. There are many other variables that you will want to weigh in as well. This includes the requirements to qualify for the loan (credit check, specific income, etc), the maximum amount available (by time period), repayment plan, and much more. Both the Perkins and Stafford student loans are great choices but there are different options available for them as well. You will definitely have to determine how much financing you require and make sure the repayment plan and terms of the loan are optimal for you.
An Alternative Method of Obtaining Fixed Rates Loans
While federal student loans can provide you with a sense of security regarding the rates, you may not be able to afford their offer. Although the government has designed these payment programs for people with an average income, everyone deserves a chance to obtain a college education. So, what can you do when you cannot afford the federal loans but you would still like to have the security provided by fixed rates?
The answer is quite simple: you will need to apply for a student consolidation loan. There are various companies out there that can offer you an affordable consolidation loan, thus enabling you to finance your college education. When you apply for a consolidation loan, the financial agency will take over your federal student loan and modify the payment plan, allowing you to choose the amount of the premiums and the period in which you would like to repay the loan. At the same time, a consolidation loan can offer you the same sense of security as federal loans. However, keep in mind that the longer you take to pay off the consolidation loan, the more you will spend on the interest fee.
Considerations on Secured Student Loans with Fixed Rates
As a student, you probably do not own any property or valuable assets, thus you cannot secure the loan in you name. However, if your parents are willing to help you on this one, you can use them as co-signers on your contract. As co-signers, they agree to use one of their assets, such as the house, as collateral for your loan. This will significantly reduce the interest rates of your loan, but you will need to think carefully whether you will be able to make the payments on due time, unless you want your parents to lose their home.
There is an abundance of information available for the various types of fixed rate student loan programs online. It is highly recommended that you look into the federal student loans that are available. Do a quick search for more information on both the Perkins student loan and the Stafford student loan. Also, look into the various types of these loans, such as subsidized and non-subsidized student loans. In closing, fixed rate student loans are very beneficial and extremely common so they should be your main consideration when looking to apply for student financing.