Additional loan expenses — such as origination fees or monthly service charges — can be factored into what’s know as your effective annual percentage rate (APR).
Private lenders try to charge enough interest to compensate for the fact that some people they lend to won’t pay them back.
The difference is simple: the rate on a variable interest rate loan can change over the life of a loan, whereas a fixed rate will remain the same unless you refinance it.
Rates on government student loans are always fixed, and don’t take into account the credit risk posed by the borrower.
That can be a good thing if you have little credit history, or would be considered a high-risk borrower by a private lender.
In this edition of the student loan plan, we take a look at Mallory’s federal student loan dilemma.
She has a total of eight student loans, some subsidized, some not, with a range of interest rates.
If you want tips for dealing with your student loans, contact us. Interest rates are an important concept to wrap your head around if you’re considering taking out or refinancing student loans, especially when given the option to choose between a fixed or variable interest rate.First off, an interest rate is the amount charged by a lender for the use of the money you are borrowing.Broadly speaking, the interest rate is an annual rate you pay on your outstanding loan balance.If you start out with a ,000 loan balance at an annual interest rate of 5 percent, you’d expect to pay about 0 per year in interest.Charging interest is one of the main ways that lenders make money.