Back-to-school season may seem far off, but with today’s, it’s never too early to start planning your finances.
Financial scholarships are always a great place to begin, andmay offer the most favorable terms, potential forgiveness and flexible repayment plans. But private student loans can also be a good option for students who don’t otherwise qualify or who need additional funding.
In the current, though, the student loan rate you qualify for can have a big impact on your future payment plan. That’s why it’s important to ensure you score so you can minimize what you owe throughout the repayment process.
Start comparing top student loan options today to find out how much you can borrow.
How to get the best student loan rates
If you’re considering taking onthis year, we’ve gathered a few tips from experts that can help you qualify for a competitive rate.
Work on your credit score
If you still have a while before you need to apply for your student loan, now is an ideal time to ensure your credit is in good standing. Lenders use yourand credit history as one of the most important factors in determining the loan and interest rate you qualify for.
“To secure a low rate in today’s environment, student loan borrowers will be more competitive with good credit history, a strong credit score and income relative to the loan balance,” says Cecil Staton, CFP, president and wealth advisor at Arch Financial Planning.
Start by viewing your credit score (which you can usually access through your bank or even credit card account) and going over your credit report for any errors or potential fraud. Toover time, make sure you complete monthly payments on time and in full, keep your credit utilization low and don’t open other loans or lines of credit close to the date you plan to submit your student loan application.
When borrowing any type of loan — whether a student loan, personal loan or even home mortgage — shopping around is one of the best ways to make sure you get the best loan terms.
“Borrowers should evaluate several different student loan companies before choosing one,” says Joseph Schmidt, CFP, founder of Sunrise Personal Finance. “The same borrower may receive very different interest rates from various lenders.”
Not only can you compare each lender’s range of rates offered, but you can even see the rates you might qualify for, using information like your credit score, income and amount borrowed. Check for pre-qualification options to get a more accurate assessment (without hurting your credit score) and compare three or more different lenders.
“Federal loans have set rates, so there is no real ability to get better or worse rates there,” Jared Andreoli, CFP, founder of Simplicity Financial. “As for private loans, you really should shop around; better rates can be found.” Andreoli also recommends building your credit and even considering a co-signer for the loan. “All of these areas can affect the rate you receive on your student loan.”
Find the right loan term
The loan term — or the length of time you borrow the money for — is another thing to take into account to find the.
“Another critical consideration is the term of the loan or the number of years you have to repay the loan,” Staton says. “Generally, the shorter the loan term, the lower your interest rate could be. Mortgages work similarly: 30-year mortgages, on average, tend to have higher interest rates than 15-year mortgages.”
“The caveat is that the shorter the loan term, the higher your required payment is,” Staton adds.
Even with a lower interest rate, a shorter amount of time to pay down your loan can result in higher monthly payments. Make sure you read the full terms and conditions of your loan before you sign so you know exactly what to expect when your payments are due.
The bottom line
Start exploring your student loan options today and see how much you may be eligible for.may be a pricey option for education expenses. But whether you use them on their own or in tandem with federal loans, there are ways to ensure you get the best possible rate among lenders today. Make sure you take time to apply with the best credit score you can, shop around to find out what you can qualify for and choose a loan term that fits your needs.