When looking for a student loan you will find that you have several options. Private and federal banks will offer student loans. Banks will have its own unique selling proposition and will try and offer you a good deal so as to convert you as a customer. The important aspect here is that you must be able to understand what you want from the student loan deal and want are the important aspects to keep in mind when playing out your repayment schedule.
Below are a few tips that will help you to plan the interest rate of your student loan to best suit your needs:
- Time - When you decide to take a student loan begin by roughly trying to calculate how much of your income will go into repaying the loan. Most student loans follow the 20 year repayment schedule, but this time can be extended if you so wish. Work on the figure of the interest rate, and then calculate how much of your income this figure will take away. Do not get ambitious and decide to give away 50% of your income in the repayment. Remember you will have other needs too and it is best to keep the repayment to its minimal level. Since the interest rate of student loans is the lowest, it is best to keep this loan running rather than taking up another one to meet your needs. So keep the interest towards a low percentage of your income and extend the loan over as long a time period as you can.
- Fixed – While the federal bank offers a fixed rate of interest, some banks work with a variable one. The former is a much safer bet than the latter. It is best to opt for a fixed rate of interest and based on this calculate the interest. In this case you are sure that this interest rate will not increase, and can plan your budget accordingly without having to bother with the fluctuations in the market. Past trends prove that the rate of interest in a variable loan rarely dips but instead almost always rises.
- Percentage - The federal government has decided to come up with student loans that offer the borrower a capping facility. Here the interest rate is fixed at a certain percentage of the borrower’s income as opposed to a pre set amount. This means that when the borrower is out of a job, the student loan interest will be paused too. In case the borrower is making a lesser amount than before, the amount of the interest rate will also be reduced, which is a huge relief especially in the present economic depression state.
As is clear, choosing the right interest type is very important so that you can keep the pressure of the repayment to a bare minimum. Make sure that you read the terms and conditions of the loan properly and fix the interest rate to the best of your requirements.