Private student loans are often used as a way to fill college funding gaps when federal loans and financial aid are insufficient. But because they’re offered by private lenders and not the federal government, private student loan interest rates can vary widely depending on a number of factors.
Current interest rates on student loans are relatively low compared to the same time last year, according to data from Credible. While interest rates on private 10-year fixed-rate student loans tend to spike at the start of the academic year, they have hit a lower rate than in 2020.
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Interest rates on 5-year variable rate private student loans are also at the same level as at this time last year. During the second week of September 2020, the average variable rate loan rate was 3.39%, compared to 3.19% for the same week in 2021.
Keep reading to find out how you can get a low private student loan rate and save money on your college financing plan. You can browse student loan rates from real private lenders in the table below.
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How to get a good interest rate for a private student loan
Federal student loans have fixed interest rates that depend on the type of loan you take and when you take it. But private student loan interest rates can vary depending on a number of factors, such as the borrower’s credit rating, loan amount, and length of repayment period.
Here are some ways to ensure you get the lowest possible private student loan rate for your situation.
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Find a creditworthy co-signer
Student loan rates are based in part on the creditworthiness of the borrower, but many rising students haven’t had a chance to build a decent credit history before heading off to college. That’s why many student borrowers rely on a co-signer to get a lower interest rate.
A recent analysis by Credible found that student borrowers with credit scores below 620 could lower their rates by an average of 4 percentage points by adding a co-signer. The amount you can save depends on your co-signer’s credit score.
Before asking someone to co-sign your student loans, get a clear picture of the Annual Percentage Rate (APR), student loan fees, and repayment examples. You can view student loan rates and repayment options on Credible without affecting your credit score.
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Shop with multiple lenders
Since private loan interest rates vary by lender, it’s important to compare offers from multiple lenders to ensure you get a decent rate.
Most private student lenders allow you to verify your estimated interest rate with a soft credit check, which won’t hurt your credit score. This way you can choose the best offer for your situation before you apply – usually the one with the lowest APR.
According to a Credible analysis, well-qualified borrowers may be able to save more than $5,000 on their student loan debt by comparing student loan interest rates before choosing a lender.
You can compare student loan repayment plans on Credible for free.
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Sign up for an autopay discount
Some online lenders will offer a lower interest rate if you sign up for direct payments which are automatically deducted from your bank account. An automatic payment discount can be a great way to reduce the amount you pay in interest while ensuring you never miss a student loan payment.
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