Fixed Rate Student Loans: Your Financing Options

If you are researching the financing options to either go to college and do your undergraduate degree, or stay on or return to school for post graduate studies, then you may have noticed that some of the student loans on offer have a fixed rate of interest and others do not.

A fixed rate means you will pay the same amount of interest (represented as APR) for the entire time that you owe money on that loan. The alternative is a variable rate loan, where the amount of interest you pay will fluctuate depending on market conditions.

All federal student loans finance has a fixed rate of APR, and this is the rate you will pay for the lifetime of your loan, which in some cases can be as much as twenty-five years. Private student loans vary in their offerings, however their rates are inevitably always higher than the federal loans whichever style of interest rate they have, so these should always be considered a last resort if you have exhausted any federal loans or grants and scholarships, and any other ways of getting money such as informal loans from your family or getting part time work.

If you are an undergraduate or have a poor credit rating, you are likely to need a cosigner to apply for any kind of private loan successfully. This will in most cases be your parents, but you can choose any willing adult with a sufficient credit history to be your cosigner.

A fixed rate loan is good because you know the exact amount of interest you will accrue over the course of your repayment, which will typically take ten to twenty years. If you have fixed rate loans, it is also easier to consolidate your loans at a later date as it is easier for a lender to repackage fixed rate loans, and consolidation is often a good option further down the line if you want the convenience of only one repayment a month and lower monthly outgoings where you have multiple loans from your college days to pay back.

Also, given the high level of uncertainty in the current economy, a variable rate loan, while it could feasibly over 20 years leave you paying less, that is much further ahead than anyone can predict or forecast market behavior for and so the concept of a variable rate of interest you don't have any control over can be a bit of a scary concept. For these reasons, at present, loans for students are seeing fixed rate loans as the most desirable option.

The offerings from different lenders vary a lot, all with their own pros and cons, so if you need to travel down the path of taking out private student finance and you have a creditworthy cosigner willing to apply with you (or you are a mature student with a good enough credit rating of your own), then the next step is to start shopping around for the best deal. www.studentloansfinance.co.uk

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