It is quite common knowledge that student loan debt is now a major problem for many people. Sadly, many individuals who took out various students loans do not know how student loan interest rates work. When many people apply for student loans, they simply accept the terms and conditions without question. They didn’t ask about interest rates or even spend the time to understand how loans would impact their life in the future. If you are in the same boat, here are some facts you need to know about interest rates on students loans.
Mutual Benefit
When borrowing money to finance your college education, lenders require something in exchange to ensure the deal is mutually beneficial. That’s why there are interest rates. Lenders usually impose an annual amount as a percentage of the total amount of money you borrow. These interest charges are then added to the total balance, which should be repaid monthly.
The annual percentage rate (or simply APR) will depend on a number of factors, including time. Today, it is common to pay an interest rate of approximately 3% to 6%. Federate student loans are offered by the relevant government body, which sets the interest rates. Loan servicers do not set their own interest rates and in most cases, loans carry a fixed rate throughout the entire duration.
Credit History
On the other hand, private lenders are able to set their own rates. While base rates are determined based on the same considerations as federal students loans, …
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