Interest Rates

An interest rate is the amount charged on money borrowed or lent and is usually expressed on a per year basis. Interest rates can be either variable, meaning that the amount of interest charged varies due to the market, or fixed, meaning that the amount of interest charged will never change. There are three forms of interest rates: prime interest rate, nominal interest rate, and discount rate.

Historically, the prime interest rate is the lowest interest being charged at a specific place and time and is offered only to preferred customers. The interest rate charged by a bank is largely based on the risk of default that a borrower poses. A banks best customers obviously have a very low risk of default and thus the bank is able to afford to give these customers the best possible interest rate. These best customers are usually corporations.

The prime interest rate is usually approximately 3% above the federal funds rate, the rate by which a bank lends immediately available funds to another bank overnight. The Federal Open Market Committee meets eight times a year specifically to set the federal funds rate and the prime rate. The prime rate does not change on a regular basis as other interest rates do, only when banks come together and decide it must be changed. The prime interest rate is often used in order to measure a nations economic success and serves as the measuring stick for all other forms of interest rates.

The nominal interest rate, also known as the stated interest rate is a predetermined interest rate and often less than the effective interest rate which is the actual interest paid. This form of interest rate does not take inflation or any other factor into account and therefore is unreliable. In order to come up with the real interest rate we merely take the nominal rate and subtract form it the rate of inflation.

The effectiveinterest rates, mentioned above, is the interest rate on a loan that takes the nominal interest rate and adds to it annual compounded interest. Its also known as the Yield. It is different from the annual percentage rate because it usually does not incorporate one-time charges or other anomalies. Also, the effective interest rate does not have a legal definition. Its main purpose is to make loans easier to compare by converting any loan into the equivalent annual rate because different loans have different compounding terms. Keep in mind that the effective interest rate can be differently depending on the situation.

Lastly, there is the discount rate. This rate is what the Federal Reserve charges member banks on loans and determines the present value on future cash flows. This is a very limited form of borrowing and is usually pursued only after other means have been attempted. Each Federal Reserve Bank presents its discount rate to the board I order to be approved; therefore, not all discount rates will be the same for all 12 banks.

Instruction For Students to Get Loan Consolidation Rates

Do you have a large sum of different students loans, and are slowly going crazy trying to remember when they are all due and how much you are required to pay? If so, then consolidating your student loans into one loan will make your life very much easier and smoother. A student loan consolidation will allow students to combine all of their student loans into a consolidated one. Consolidating student loans can help they deal with your budget and minimizer their monthly payment as well. Nevertheless, before you sign a loan contract, make sure you shop around for the best interest rate you can have.

Finding student loan consolidation rates may take them a bit time for research. Luckily, they can be easily found on the internet as there is much information of this matter online. You are able to calculate an estimate of your loan consolidation rate. Loan consolidation rates are available for almost types of federal student loans. Furthermore, consolidating private student loans can be done.

In order to help students to get loan consolidation rates, we want to the following four steps.

The first thing to do is recording student loan debt and rate. You should gather information on all of your loan debts, and then find the rate for each of them. Moreover, you had better write down the total loan debt sum and rate.

Secondly, calculate the consolidation rates. Remember to calculate the weighted average of the debt interest rates on the loans you will consolidate into one loan debt. Multiply each loan debt amount by its student loan rate. Then add the totals together. Don't you forget to split this number by your total loan debt amount. Round this number up to the nearest 1/8 of a percent as this will be your estimate of your rate.

As primary as the two stated steps above, the third one you should get is to find the best consolidation payment. Best consolidation help lessen your monthly payments and help you lock in one low interest rate until you pay off you loan. Profitably, it does not have loan fees or early payment punishments.

Lastly, search for the resources as good student guide to financial assistance and consolidation rates, current interest rates from chase for student loan consolidation, student consolidation interest rates and fees and Federal student aid - student loan consolidation for current interest rates information.

Important Facts Regarding Private Student Loan Consolidation

One of the best ways for students to finance their education is to consider the financial options they can get through student loans. If federal loans are not sufficient in covering the full cost of education, loans from private institution are available. If you find yourself in a tight spot with the many private student loans you have incurred, you might want to consider private student loan consolidation. Just like any government loan, consolidating means compounding all existing loans into one. There are many private institutions offering their services to students who are facing difficulties in paying their multiple student loans.

When you apply for consolidation of private student loans, the private institute will have to check on your credit history. Unlike government consolidation where there is no credit check, it takes 45-60 days for them to evaluate your application. You can apply through their website in the Internet or you can visit them personally.

Although there is no need for a co-maker, your application can easily be considered if you have someone who will apply with you; either a family member or friend who has a good credit standing. Once it is approved, all other existing loans will be paid off and you will only have a single loan to think of. You will be subjected to the terms and conditions of the private company that consolidated your loan.

Considerations should be taken into account in regards to interest rates, prepayment period and monthly payment. Interest rates are usually lower when you consolidate. Once you maintain a good standing in paying your account, private companies can lower down interest rate to as much as 1% thus, saving you money. You can also get.25% interest discount if you sign up for an automatic debit account payment.

Prepayment period is longer. Instead of the usual 15 years, it can be extended to 30 years. Longer prepayment period would also mean a smaller monthly payment. It can certainly give you the breathing space you need while you are still looking for a good paying job.

There is no pre-termination fee if you opt to pay your account early. This is a good option to consider so that you don't have to be saddled with an account unnecessarily for a long period of time.

In applying for a private student loan consolidation, you are not required to put in any form of collateral.

How To Get The Cheapest Student Loan Consolidation Rates

Whenever a student needs a debt consolidation loan, he asks a student loan consolidation company for help. People working there will help him with the multiple educational loans offering a single loan with better benefits, interest rates and terms. If you're in doubt about the consolidation loan advantages, then you should know that you'll receive a lower interest rate that will make the monthly payments more affordable. Also, you'll be writing only a single check every month and you won't have to remember all the previous monthly payment dates. If you're looking for a student loan consolidation company, don't choose the first one you find. Before making any decisions, you should do a little research and find the one that suits you best. If you sign with the wrong company, you might end up paying a lot more than your current payments and that's not good at all. Take your time and analyze the market because a good student loan consolidation company must help you eliminate your debt by offering lower monthly payments with better interest rates and attractive benefits. Usually the lenders won't ask you to pay any additional fee. That's why if you meet one that does that, you should be very careful. In this case it's recommended that you ask why they are asking you for more money. Don't sign the loan right away even if the lender insists. Before agreeing to anything you should check out the best rates available and all the offers on the market. Also, it is very important that you read all the terms and conditions on the contract because any unwritten promises worth absolutely nothing. You sign only if all the documents are all right. In order to be eligible for student loans, a student loan consolidation company must be accredited by the Association of Independent Consumer Credit Counseling Agencies. Once you've settled for a company, check its name over the Better Business Bureau. By doing that you'll find out if there were any complains about their services. All viable companies are registered here and you can trust a loan company with your money only after a solid background check. When dealing with a student loan consolidation company, you should do your best to obtain very low interest rates. Take your time, study their offer and sign the contract only when you feel you're ready. Discover which are the best student loan consolidation companies online. Learn more about the consolidation of federal student loans.

How To Get The Best Student Loan Rate Possible

Getting the lowest student loan rate possible can be rather tricky. There are so many different ways that you can get funding for school, you really have to do some digging to find out how to get the best rate. In the end, you may have little choice in the matter.

Part of your student loan rate is going to be based on the current average interest rates. If you have student loans from previous terms and interest rates have dropped, you may consider refinancing or consolidating those loans to take advantage of the lower student loan rate. However, you do not want to do this with subsidized loans, as you will suddenly become responsible for paying the interest on these if you consolidate or refinance them in any way other than through the Department of Education.

The Department of Education does offer some direct loans and direct consolidation loans. The problem with getting these loans is that you have a set interest rate of 8.5 percent. In recent years, 8.5 percent is much higher than the average interest rates. Basically, its not a good deal unless you have such bad credit that your interest rates are over 9 or 10 percent, which is unlikely.

Your credit does play a role in your student loan rate, especially if you are getting private loans. The better your credit, the lower your interest rates will be. That is just common sense. However, there are other factors that may be taken into consideration, such as current income, expected income after graduation, cosigners, and overall credit history. In other words, there is much more involved in determining the student loan rate than just your credit score, which is used in other types of interest rate configurations.

In the end, the only way to get the best student loan rate is to do your research into every possible loan source and choose the one that you qualify for that has the lowest interest rates and finance charges. You should also consider other factors in your decision, however, because the lowest rate doesnt necessarily mean the best loan for you.

How To Get The Best Student Loan Consolidation Rates

Do you have lots of different students loans, and are slowly going crazy trying to remember when they're all due and how much you need to pay? If so, then consolidating your student loans into one loan will make your life a lot easier. But before you sign a loan contract, make sure you shop around for the best interest rate you can get.

One of the most important things you can do in order to get a good interest rate is to have good credit. This sounds very simple, but plenty of people go loan shopping without even knowing what their FICO score is. There are plenty of places you can go online to check your FICO score for free, so do a search and find one. Having this information makes it much easier to search for a student consolidation loan that suits your credit profile - and so find the best interest rate. The federal consolidation loan has a fixed interest rate, based on the weighted average of the interest rates of the student loans being consolidated, excluding Health Education Assistance Loans (HEALs), rounded up to the nearest 0.125% or 8.25%, whichever is less.

The weighted-average interest rate calculation is based on the official interest rates for the student loans being consolidated, exclusive of any borrower benefit or other special rate discounts.

By law, all lenders are required to use the same interest rate formula for federal consolidation loans. Instead, you should consider customer service, flexible repayment options, online account access and applications, reputation and industry experience when selecting a lender. Visit:Student Loan Consolidation Rebate

How To Consolidate Student Loans - Federal Versus Private Loan Consolidation

Student loan consolidation can be used by student or parent borrowers to combine their multiple education loans into one loan with one monthly payment. As any student can take either federal or private student loans, he or she can also take a federal or private consolidation loan to make the education debt more manageable.

Both federal and private student loans offer significant benefits, but federal loans offer borrowers many benefits that don't come with private loans; for instance: low fixed interest rates, income-based repayment plans, loan forgiveness and deferment options. While some private lenders may offer them too, it usually is associated with some strings attached.

For those reasons, every borrower should always exhaust federal student loans options before considering a private loan. The same advice applies to consolidating student loans - always look at federal consolidation loan first and only if you don't qualify for a federal loan of it is not the right choice for any reason, and then seek a private consolidation loan.

It is important to remember that a federal student consolidation loan can't include any private loan. Moreover, if you consolidate your federal student loan into a private consolidation loan, you will lose your federal borrower benefits mentioned above (unless you private lender tries hard to get your business and includes them in the offer).

There are important differences between federal and private student loan consolidation.

First of all, with federal student loan consolidation, you will have a fixed interest rate, while private student loan consolidations are credit-based, which means that your consolidation loan rate will not be locked - it will be variable. So, while you will not have to go through credit check in order to apply for a federal consolidation loan, you will need it to secure a private consolidation loan.

Student loan consolidation rates are determined differently for federal and private consolidations. The interest rates for federal loans are set according to a formula established by federal statue. It's a fixed rate, based on the weighted average of the interest rates on each of your loans at the time you consolidate, rounded up to the nearest 1/8th of a percent and capped at 8.25%.

As private student loans are not funded by the federal government, they are subject to the terms determined by each individual lender (bank, credit union, other financial institution) and the market competition. In private student consolidation loans a borrower's credit is the primary factor in the variable interest rate offered to the borrower. As the base for setting the consolidation loan interest rate, the private lenders most often use the Prime rate or the 3-month LIBOR Rate, to which they add a margin. That margin varies from lender to lender and is applied according to the borrower's credit rating.

With regards to the interest rate on the consolidation loan, it's typical for both federal and private consolidation loan to include 0.25% rate reduction for automated debit payments.

Repayment of federal student consolidation loans begins within 60 days of the disbursement of the loan, with the payback term ranging from 10 to 30 years, depending on the amount of education debt being repaid and on other debts owned, as well as on the repayment option chosen by the borrower. Private student consolidation loans can also have repayment terms of up to 30 years, although they have fewer repayment options. Usually, repayment begins 30 days from the time your private student consolidation loan is funded.

While the most important factors looked at when deciding about how to consolidate student loans are the interest rates, borrower benefits and the terms of repayment, there are also other significant factors, such as: fees or cost to consolidate, prepayment penalties, loan amount limits, customer service, etc.

There are no fees or application costs whatsoever for processing and providing a federal student consolidation loan. It's against the law to ask for advance (up-front) fees for arranging a federal education loan or consolidating federal education loans. However, some federal education loans (e.g. the Stafford and PLUS Loans) may require some fees, but they are always deducted from the disbursement check. On the other hand, private lenders may charge fees for application and processing private consolidation loans. Some private lenders charge fees as high as 4% of the principal you owe.

Federal consolidation loan programs don't require a minimum balance to consolidate student loans; some private lenders require a minimum balance before they consider a borrower's application for consolidation. That amount varies from lender to lender, but usually is between $5,000-$7,500 in US-issued private education loans.

With both federal private consolidations, there are no penalties for prepayment - all payments in excess of scheduled payments will go directly to principal and that will help to repay your consolidation loan faster.

The application process for consolidation of private student loans differs from the federal consolidation. Sometimes applications for private consolidation loans may be easier to complete (often done online or over the phone). However, it's worth remembering that federal loans usually have lower interest rates, borrower benefits and better repayment terms than private student loans. Moreover, federal applications for both original loans and consolidation loans require FAFSA, so with the federal consolidation, your application is already partly completed.