Loan Interest Rate
Started by RaiderNation
mine is 2.77% for gov't loans and 3.0% for private loans
Same as Brocnizer's. If rates stay low, then a smart thing to do is to consolidate into a 30-year payment, pay the minimum amount each month, and then put the rest that would have been payed if a 10-year repayment had been done and invest that.
For example, with Sallie Mae loans, they knock 1% off after 48 months of continuous payment, which drops the rate down to 1.77%. Then, if you do direct deposit they knock off another .25%. That brings it down to the 1.5% range, which is absurd. So, if you can find an investment that brings in a minimum of 4-5% on a continual basis, then it would be ridiculous NOT to invest the excess funds after paying the minimum loan. That is, as long as their are methods of investing that easily eclipse the 2-3% loan interest rate, then money is to be made.
Essentially with rates this low people who choose to pay off their loans quickly rather than taking their time and investing the monies they would have used to pay off the loan are actually losing money.
The catch/trick is that you MUST invest the loan funds rather than spending it. If you were to spend it then you would be much better off of course just paying down the loans in 10 years. But if you can invest then you are far better off paying the minimums for 30 years and investing the extra funds you had set aside for payment.
I worked it out and on a bad investing year it turns out that the person who pays minimum payments for 30 years and invests the excess would stand to gain around $500,000 in the long. That's on a bad year.
For example, with Sallie Mae loans, they knock 1% off after 48 months of continuous payment, which drops the rate down to 1.77%. Then, if you do direct deposit they knock off another .25%. That brings it down to the 1.5% range, which is absurd. So, if you can find an investment that brings in a minimum of 4-5% on a continual basis, then it would be ridiculous NOT to invest the excess funds after paying the minimum loan. That is, as long as their are methods of investing that easily eclipse the 2-3% loan interest rate, then money is to be made.
Essentially with rates this low people who choose to pay off their loans quickly rather than taking their time and investing the monies they would have used to pay off the loan are actually losing money.
The catch/trick is that you MUST invest the loan funds rather than spending it. If you were to spend it then you would be much better off of course just paying down the loans in 10 years. But if you can invest then you are far better off paying the minimums for 30 years and investing the extra funds you had set aside for payment.
I worked it out and on a bad investing year it turns out that the person who pays minimum payments for 30 years and invests the excess would stand to gain around $500,000 in the long. That's on a bad year.
I have sallie-mae for private. The deal I got was prime minus 1%. I know NYU negotiates with lenders, so i'm not sure if Nova will have the same rate
From what I have come across all the private lenders are offering very competitive rates. Either they use the prime rate (+0%) or the use the LIBOR (+2.65-2.75). Most, if not all, are now offering 0 loan fees.
With lenders, the difference lies essentially with the repayment incentives. On private loans I have not found any lenders offering more than 1% break. For example, Citibank is currently offering .50% off after 48 months, and .25% for auto debit.
With stafford lenders the incentives are a lot better. Citibank does offer 2% after 48months and .25% for auto debit. My favorite is Education Loan Resources. They offer 2% immediately and an extra .50% for a MSLP guarantee. (Guarantee the loan in the state of Missouri?). Chela Financial also offers 2% right away with auto debit.
In regard to what Gavin mentioned, that will only work if two conditions are met. 1) The interest rate will stay this low by the time you graduate (I hope not for the countrys sake) and 2) you are very very disciplined with managing money and you are in the position to save the money to begin with. Its definitely possible, but lets see what the rates look like in 3-4 years.
Education Loan Resources (Stafford)
MOHELA 213-821-7194
www.elresources.org
Private lenders
Keybank (LIBOR) - 800-539-5363
www.key.com/educate/grad
Northstar (LIBOR) - 888-843-0004
www.northstar.org
Citibank (prime rate) - 866-515-8352
www.healtheducationloan.com
With lenders, the difference lies essentially with the repayment incentives. On private loans I have not found any lenders offering more than 1% break. For example, Citibank is currently offering .50% off after 48 months, and .25% for auto debit.
With stafford lenders the incentives are a lot better. Citibank does offer 2% after 48months and .25% for auto debit. My favorite is Education Loan Resources. They offer 2% immediately and an extra .50% for a MSLP guarantee. (Guarantee the loan in the state of Missouri?). Chela Financial also offers 2% right away with auto debit.
In regard to what Gavin mentioned, that will only work if two conditions are met. 1) The interest rate will stay this low by the time you graduate (I hope not for the countrys sake) and 2) you are very very disciplined with managing money and you are in the position to save the money to begin with. Its definitely possible, but lets see what the rates look like in 3-4 years.
Education Loan Resources (Stafford)
MOHELA 213-821-7194
www.elresources.org
Private lenders
Keybank (LIBOR) - 800-539-5363
www.key.com/educate/grad
Northstar (LIBOR) - 888-843-0004
www.northstar.org
Citibank (prime rate) - 866-515-8352
www.healtheducationloan.com
Gavin and Shawn,
The information from you both is so detailed and over my head... where do you get it from? Respective financial aid departments? Cold, hard experience? Where can the rest of us go to get such a wealth of knowledge about our finances?!!!!!
The information from you both is so detailed and over my head... where do you get it from? Respective financial aid departments? Cold, hard experience? Where can the rest of us go to get such a wealth of knowledge about our finances?!!!!!
ShawnOne said:
Yes we do. We get some great repayment breaks too! Essentially what you wrote
Wow, sounds like you guys have some good choices for private lender loans. Right now at Nova, we have Dental Access, Citibank and one other that I can't remember off the top of my head because the other two are superior. I don't know if it would be better to go with Access (based on LIBOR) or Citibank (prime+0.25%).
Thanks for your information. For Stafford Loans, we have Sallie Mae, which offers excellent rates. Right now, my undergrad loans are locked at 2.125%.
I don't know if the interest rates will stay low. It depends if the economy goes out of recession. Which depends a lot on who gets put in the white house this year.
Jessica
Thanks for your information. For Stafford Loans, we have Sallie Mae, which offers excellent rates. Right now, my undergrad loans are locked at 2.125%.
I don't know if the interest rates will stay low. It depends if the economy goes out of recession. Which depends a lot on who gets put in the white house this year.
Jessica
ShawnOne said:
You are 100% correct. The sad thing is that neither of those reasons factor into whether or not my family and I take out loans, so I'm leaving the 30 year minimum repayment/invest game open as an option. Even if interest rates do jump, I think a solid investment can be made.
Hi there
Gavin are you becoming a dentist or MBA in Finance?Way to go man you really seem to know everything.
Anyway could you share some knowledge with me?What are the interest rates for international students?What wud it be if I wish to(and I know its near impossible) repay the loan in say 5 years after graduation.
also pls let me know which sites I shld check out for private loans.I have some one who is ready to be co-signer.
Gavin are you becoming a dentist or MBA in Finance?Way to go man you really seem to know everything.
Anyway could you share some knowledge with me?What are the interest rates for international students?What wud it be if I wish to(and I know its near impossible) repay the loan in say 5 years after graduation.
also pls let me know which sites I shld check out for private loans.I have some one who is ready to be co-signer.
