Need Private Loan Advice??

Discussion in 'Dental' started by ZeroCool, Jul 27, 2006.

  1. ZeroCool

    ZeroCool Member

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    I know several of the SDN members are finance majors, so I thought I'd ask your thoughts on the following:

    I need to borrow $30,000 in private loans for my first academic school year but I can't decide which loan vender to use. Citibank has offered me the loan for prime rate + 0 for both in school and repayment (so 8% with no fees). Key Bank has offered me the following with no fees: (the libor rate is 5.42 as of this quarter)

    Variable Quarterly: tied to 3-Month LIBOR plus 2.65% in school and:
    10-Year Term = 3-Month LIBOR plus 2.75% during repayment
    15-Year Term = 3-Month LIBOR plus 3.00% during repayment
    25-Year Term = 3-Month LIBOR plus 3.50% during repayment

    Both loans will fluctuate each quarter as the rates change accordingly with the economy and market. MY question to all the knowledge finance people is what loan is a better deal. At first glance the Key bank loan looks more appealing (cheaper interest) but I've read from several sources that the Prime rate raises more quickly than the Libor and doesn't recess as quickly when the market improves; whereas, the Libor rate concisely followes market fluctuation -both rising and lowering. Here is an excerpt from the financial aid website (http://www.finaid.org/loans/privatestudentloans.phtml):

    "The Prime Lending Rate tends to be 2.5% to 3.5% higher than the LIBOR rate and 2.8% to 4.0% higher than the 91-day T-Bill. For example, the 3 month LIBOR for July 1, 2005 through September 30, 2005 was 3.38%, while the Prime Lending rate was 6.00%. The LIBOR rate tends to be slightly above the 91-day T-Bill rate and to track changes in the 91-day T-Bill rate. The Prime Lending Rate tends to be somewhat more volatile than the LIBOR rate. The general trend with the Prime Lending Rate is to lag decreases in bank cost of capital but to immediately reflect increases. The spread between the Prime Lending Rate and LIBOR is increasing, meaning that over the long term a loan with interest rates based on LIBOR will be less expensive than a loan based on the Prime Lending Rate."

    After reading this excerpt, what loan seems like a better choice. The Prime rate loan is lower but apparently more volatile. The Libor Rate has a substantially higher repayment rate, but is it worth the almost 1% difference for it's stability???? Any suggestions would be great. I'm sure other people have run across the same scenario. Thanks :confused:
     
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  3. DrTacoElf

    Dentist

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    Hey zero cool, you should just hack the gibson :D
     
  4. drengineer

    drengineer Back to surfing!

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    Already done that, doesn't help much in paying for dental school. :laugh:
     
  5. Lesley

    Lesley Member

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    I can not answer your question, but from the finaid.com site, click on student loans, then private student loans, then answering your questions and you'll get to ask the advisor that allows you to ask specific questions that will be answered by someone with financial expertise, as per their statement. Maybe you can paste your post. Have you tried the financial aid section of SDN? Your local bank?

    No matter which one you choose it is obvious that you will be at the mercy of the markets. I get dizzy just reading through stuff like this! Prime was the only option years ago, so it was one less decision we had to make. Not such a bad thing. It's great that you are trying to figure it out. When you do, please let us know what turns out to be your best option. Maybe we can learn something too. Thanks. Good Luck.
     
  6. ems5184

    ems5184 Denist (future)

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    Do the GRAD PLUS loan and then you wont be at the mercy of the market. It is a fixed rate (7.9% at my school - other schools may have other deals) and it can be consolidated with your stafford loans saving you a lot more in the end. The variable interest rates will screw you over, avoid them if you can. The rates are only going to increase over the 4 yrs we are all in dental school.
     
  7. 3rdMolarRoller

    3rdMolarRoller User Account Deleted

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    do grad plus. First year they are offering it

    My school is 6.75% fixed when in repayment which I will start from day one since the payments aren't so bad
     
  8. 3rdMolarRoller

    3rdMolarRoller User Account Deleted

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  9. ElDienteLoco

    ElDienteLoco Senior Member

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    How are you guys getting rates like that? I thought it was a federally mandated 8.5%? Just curious because I'm paying 8.5% + a 3% origination fee! My school told me that was all that was available...
     
  10. Dutchboy

    Dutchboy Senior Member

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    But with GRAD PLUS there is no grace period for repayment. So you will have to start making payments instead of deffering the interest.
     
  11. Rezdawg

    Rezdawg 1K Member

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    Yeah, I thought it was around 8.5% as well...
     
  12. 3rdMolarRoller

    3rdMolarRoller User Account Deleted

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    Yes, but if you ask your lender they will defer up to 48 months while you are in school full time. Atleast citibank does this.

    But I will start repayment right away to start some perks of the loan. Citibank is offering the following for NYU on the grad plus: 8.5% fixed (during deferment) but in repayment the rate drops 1.25% and an additional .5% for auto debit for a fixed rate of 6.75%

    The rate will vary for each school with each lender. NYU does a great job negotiating rates.

    http://studentloan.citibank.com/school/nyu/Plus.asp
     
  13. 3rdMolarRoller

    3rdMolarRoller User Account Deleted

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    Shop around, many many different lenders with tons of options.
     

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