Student Loan Consolidation Info - Co-signer’s for Student Loans and Loans
October 6th, 2007 at 11:14 am (Finance and Investment)
When researching your student loan consolidation info alternatives you need to consider Co-signer and No Co-signer student loans. A co-signer is a second party who guarantees to repay the loan and usually becomes involved when the original borrower has no credit or a poor credit history.
Students often have limited or no credit cards, no car loans and very rarely a home mortgage. This causes them to have a really short credit history. Often times our students have made poor decisions in the past regarding their credit. They may have charged more on their credit card than they can pay for and been late with their monthly payments.
Not having a credit history or having one that is low due to non payments will put the credit card holder in risk of being in a high risk category.Loan officers, even in federal student loan consolidation plans, will often look at that with a cautious eye. Loan applications can be denied, or accepted, but with a higher interest rate to offset the probability that your loan will go into default.
Borrowers with no credit history or poor credit can and should obtain a co-signer. Often times, this will be the parents. Lenders will look at the parent’s credit score, credit history, and other facts before deciding to give you the loan. The credit history of the parents will now decide what kind of interest rates will be given. Mostly, those who have a superior credit rating will get the best interest rates, while bad credit applicants will get a higher interest rate on their student loans.
One of the more popular programs shows that a 4% interest rate will cost $5,489 and with 6% the amount will go up to $10,647. A 2% difference may not sound like a lot, but when you break it down and factor in the way interest is compounded, it is realistic.
Normally up to $100,000 is financed for an undergraduate education by parents and students themselves. The amount of the interest alone will be $567 every month if you do not want this amount to add to the balance while the student is in school. The annual amount you will pay for interest would be almost sixty-six hundred dollars.
By lowering the interest amount to 5%, the interest amounts paid would be $417 per month and add up to just over $4,800 every year. Don’t forget, we are assuming the repayment will begin immediately for this example. By waiting until you are out of school for six months to make payments, which is common practice, will cause your amounts to be much higher if the interest rate was not deferred or subsidized.
By having a co-signer who has a good credit history, you are more apt to get better interest rates and pay less over the life of the loan. Many websites have a good calculator for figuring sample situations that might apply to you. This information will form a significant part of any student consolidation loan information.
