5 Things You Can Do to Lower Your College Loan Interest Rate

The college loan interest rate you agree too will ultimately how costly it is for you to finance your education. The cost of education is very high, but your degree will prepare you for a higher salary later in life. The interest you pay on financing for that degree, however, is an added expense with relatively no reward. Keep the rate low using these options.

#1 Research Grants and Scholarships

You do not need to be financially needy to qualify for assistance. There are academic, athletic and ethnic grants and scholarships worth consideration at every college. The office of financial aid at the college of your choice will have a complete list of funding programs. Check with your high school, community or church for further resources. Every small bit will help reduce the principal sum of your loan, ultimately reducing your interest rate.

#2 Test out of Credits

Another way to reduce your principal loan debt is to take less credits. Of course, you will need minimum credit hours to graduate. Therefore, try to test out of credits at your college through Advanced Placement classes in high school or achievement testing before your first semester. You may even be able to take some classes at community college, which is often cheaper than a four-year university tuition, over the summers while you attend school.

#3 Start Borrowing Early

Your credit score will impact the loan rate you can achieve on your student loans. Most students lack a solid financial history when they go to apply for loans, and this hurts their ability to get low cost financing. Take loans as early as high school to start building your credit. Simply managing a credit card is a good way to build your score. Take an auto loan on your first car, even if you can afford to purchase one, or are offered the car as a gift. Keep the money in the bank and be sure to use the money to build up your credit by paying the car note.

#4 Work while you Study

The terms of your loan will affect the interest rate you achieve. Deferring all payments until after graduation will make the loan far more expensive. Instead of choosing this option, consider making interest-only payments for a period of time. This can allow you to stop the interest from compounding and also pay the loan off early. Interest-only payments tend to be low, and you can cover the expense by working part time or securing a job with the college while you study. 

#5 Opt for Fast Repayment

Longer loans typically have higher interest rates. This does not just apply to student loans; long auto loans, home loans and personal loans usually have lower monthly payments but  higher interest rates. If you want to save money on your loans, you should consider paying back the loan as quickly as possible to your lender. Opt for limited or no grace periods after graduation. You can always defer or modify the loan if you do not find employment, but it is best to start early in repaying the loan whenever possible. Student who elect graduated or extended repayment options will face higher interest rates.

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