When it comes to student loans for college, the interest rate on the student loan is perhaps the most important factor to consider. The lower the interest rate on the student loan, the less money you will have to pay back over the lifetime of the loan. Here are 5 steps to obtaining the lowest interest student loans.
1. Start With Federal Student Loans
When it comes to finding the lowest interest rate student loans, federal student loans will be your best option. Federal student loans offer some of the best interest rates, and repayment options to students, and they are not based upon the borrowers credit. In order to apply for federal student loans, visit fafsa.gov and file the Free Application For Federal Student Aid.
2. Take Steps Towards Building and Improving Credit
Many students will also be considering a private student loan in addition to what they receive from federal financial aid and other college funding resources (scholarships and grants). Private student loans are based upon credit, so the key to obtaining the lowest interest student loans from a private lender will be to have excellent credit. Many college students suffer from lack of credit, one way to build a good credit history is to put some bills in your name, and make certain to pay those bills on time.
3. Consider A Creditworthy Cosigner
For borrowers with poor credit or little credit history, obtaining a creditworthy cosigner will help you secure the lowest interest student loans (private student loans). If you have a cosigner with excellent credit, this will help lower the interest rates when obtaining private student loans. If you do have poor credit, securing private student loans without a cosigner will be difficult.
4. Shop Around
While you do not want to apply for multiple private student loans over an extended period of time (this could be bad for your credit), you do want to compare private student loan products offered by different lenders. Select a few private lenders, and compare the interest rates they offer.
5. Look At The Type Of Interest Rate: Variable Vs. Fixed Rate
Most agree that a fixed rate student loan is better over the long term. Most private student loans offer variable interest rates (interest rates which can fluctuate over the lifetime of the loan), however when it comes time to repay your student loans, you may consider consolidating your student loans in to a fixed interest rate consolidation loan.