What's a good private student loan interest rate?
The fall 2023 college semester is just weeks (if not days) away for many students, and preparation for a successful school year is in full gear. One of the most important things students can do now is to coordinate their financial aid and loans so that there are no surprises throughout the year. After exhausting their federal loans — alongside any grants or scholarship opportunities — students should also be well-versed in their private student loan options.
This includes understanding exactly how much they need, how much they can borrow and which lenders to use. It also requires an understanding of private student loan interest rates. Specifically, borrowers should know what a good private student loan interest rate currently is, as well as the steps they can take, to secure as low a rate as possible.
Students can easily explore their private student loan options here now to learn more.
What's a good private student loan interest rate?
Private student loan interest rates vary significantly based on your credit profile and other factors. That being said, fixed interest rates on private student loans currently range from 4.42% to 16.99%, according to Money.com. Variable interest rates on these types of loans fall between 5.13% to 16.99%.
While these are broad ranges, borrowers can generally consider a "good" private student loan interest rate to be on the lower end of that spectrum. While that may not be as low as what could've been secured during a different point in time, it's generally considered favorable in today's higher interest rate environment.
Not sure what private student loan interest rate you'd qualify for? By answering some simple questions you could find out here now.
How to get a good private student loan interest rate
There are multiple effective ways borrowers can secure a good private student loan rate, although it won't happen overnight. Here are three things to do now:
Improve your credit profile
As with most other loans, the best rates and terms will be reserved for borrowers with the highest credit scores and cleanest credit histories. Student loans are no different. So make sure to improve your score as much as you can before applying. This means paying down debts, paying bills on time (or early) and not applying for any additional credit that could hurt your score.
"To secure a low rate in today's environment, student loan borrowers will be more competitive with good credit history, a strong credit score and income relative to the loan balance," Cecil Staton, CFP, president and wealth advisor at Arch Financial Planning, recently told CBS News.
Shop for lenders
Don't just accept the first private student loan offer you receive. Instead, shop for loans from multiple lenders. Compare rates and terms from each to see which one is offering you the most favorable terms. By using pre-qualification options, you can potentially see what rate you'd be eligible for without damaging your overall credit score. Consider getting quotes from at least three lenders so you have a baseline to compare the offers against.
Consider a cosigner
Even with a poor or incomplete credit history, you could still potentially secure a favorable rate by adding a qualified cosigner to your application. Cosigners with good credit can position you to get a better rate and terms than you otherwise may have secured on your own. You also may be able to secure a loan for a larger amount than if you had applied individually.
The bottom line
With the fall semester quickly approaching, college students who haven't gotten their financing in order should thoroughly consider their last-minute options. By understanding what a good private student loan interest rate is — and how they can go about getting the lowest rate possible — students will put themselves in the best financial position possible to start off the new school year.
