Success The Turning Point

Author(s): Rajendra Rakhecha
Publisher: Rajendra Rakhecha

Page 58

You can begin the loan application simply by doing a loan comparison that will allow you to choose the lender best suited for you. To make the process go as quickly as possible, you and your co-signer will need to complete the entire online application thoroughly. Initial credit approval or denial is very quick and typically takes 2-6 weeks from initial approval. Interest Rate Explained When you take out a loan through a lender, you will be responsible for paying back the amount of money you borrowed (called the principal) plus an additional amount charged by the lender for the loan (called interest). The interest rate is calculated based on an index plus a margin that will add an additional percentage interest rate depending on your cosigner's creditworthiness. The two most common indexes used for international student loans are the Prime Rate and LIBOR Rate:
Prime Interest Rate - This index is determined by the federal funds rate which is set by the US Federal Reserve. This is the rate in which banks lend to one another and in many cases the interest rate which commercial banks charge their most creditworthy clients. LIBOR (London Interbank Offered Rate) - Like the Prime Rate, the LIBOR is the interest rate that banks borrow from other banks. This rate is based on the British Bankers' Association and used on the London interbank market. The rate is an average of the world's most creditworthy bank's
interbank deposit rates for overnight and one year terms. When evaluating the loan, the lender will clarify which index the plan uses. Then, there will be an additional margin that will be added to this index based on the borrower's individual criteria, including the co-signer's credit history. Based on their creditworthiness, an additional interest rate will be added to the index which will be the total interest rate you owe. This will appear on your final loan paperwork as Libor + 2.8%. The application is free, and when your application is approved, your specific margin will be disclosed to you. At that point you can accept or refuse the loan. Currently the rates are anywhere between 2.25% APR and 9.11% APR. Loan Repayment Repayment will depend on the loan option you choose. Many international students must consider this as an important feature of their loan since most students cannot work while they study in the United States. Because of this, it is important to consider how much the monthly payments will be, when payments will begin, and how long students may be able to defer paying back the loan. The repayment period typically ranges from 10-25 years, however the larger the loan the longer the loan repayment period. There are standard repayment plan options depending on the loan you select:
Full Deferral - Students are able to defer payment of the interest and principal until 6 months after graduation as long as full-time status is maintained. Students can defer payments for a maximum of 4 years consecutively which is the typical length of a degree seeking student Interest Only - International students only pay the interest while in school, up to 4 consecutive years, and can defer the principal until 45 days after graduation or when students drop their course load to part-time. Immediate Repayment - Payments on both interest and principal are due immediately once the
loan has been issued and dispersed. FAQ for loan How do I apply for a student loan?