How you can lock in a good rate
Private student loans are often used as a way to fill the funding gap for colleges when federal loans and financial aid are insufficient. But because they are offered by private lenders, not the federal government, the interest rates for private student loans can vary widely depending on a number of factors.
Current student loan interest rates are relatively low compared to the same period last year, according to Credible data. While interest rates on 10-year fixed-rate private student loans tend to skyrocket early in the academic year, they have moved to a lower rate than in 2020.
Interest rates on 5-year variable rate private student loans are also comparable to last year around the same time. In the second week of September 2020, the average rate on variable rate loans was 3.39%, compared to 3.19% for the same week in 2021.
Read on to find out how you can get a low private student loan rate and save money on your college finance plan. You can browse student loan rates from real private lenders in the table below.
How to get a good interest rate on a private student loan
Federal student loans have fixed interest rates that depend on the type of loan you borrow and when you borrow it. But the interest rates for private student loans can vary depending on a number of factors, such as the borrower’s credit rating, the loan amount, and the repayment term.
Here are a few ways to make sure you’re getting the lowest possible private student loan rate for your situation.
Find a creditworthy co-signer
Student loan rates are based in part on the creditworthiness of the borrower, but many booming students haven’t had the chance to build up a decent credit history before going to college. This is why many student borrowers rely on a co-signer for a lower interest rate.
A recent credible analysis found that student loan borrowers with a credit score below 620 were able to reduce their rates by 4 percentage points on average by adding a co-signer. The amount you can save depends on the credit rating of your co-signer.
Before you ask someone to co-sign your student loans, get a clear picture of the annual percentage rate (APR), student loan fees, and repayment examples. You can see student loan rates and repayment options on Credible without impacting your credit score.
Shop around with multiple lenders
Since the interest rates for private loans vary by lender, it is important to compare the offers of several lenders to make sure you are getting a decent rate.
Most private student lenders allow you to check your estimated interest rate with a gentle credit check, which won’t hurt your credit score. This way, you can choose the best deal for your situation before you apply – usually the one with the lowest APR.
You can compare student loan repayment plans on Credible for free.
Sign up for an automatic payment discount
Some online lenders will offer a lower interest rate if you sign up for direct payments that are automatically deducted from your bank account. An automatic payment discount can be a good way to reduce the amount you pay in interest while making sure you never miss a student loan payment.
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