Student Loan Consolidation Info - Why Should You Co Sign A Student Loan by snoopdoggywuf


									Title: Student Loan Consolidation Info - Why Should You Co Sign A Student


Category: student loans

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Usually when the primary borrower has bad credit, they ask a secondary
party to guarantee to pay for the loan and they are called a co-signer.
Many students do not start out with credit accounts and they have never
even had a car loan, as a result, they have little or no credit score at
all or what credit score they have is made from bad choices. Often times,
students have charged more than they can pay off on a credit card making
it hard for them to make their payments.
Having no credit score at all is better than a credit score full of late
or never made payments , and both examples will put the potential borrow
into what lenders consider a high risk category. Loan officers, even in
Federal student loans plans, will often look at that with a cautious eye.
Loan applications may be denied, or in borderline cases a higher interest
rate is charged to offset the risk and compensate for higher default
To up the chances of getting a loan, a co-signer will be needed if you
are in these high risk categories. Most often the parents are considered
to co-sign the loan. The parent’s FICO score, payment history and other
information is reviewed before a lender will consider giving you a loan.
At the same time, the credit quality of the parents becomes the primary
factor for deciding the interest rate assigned. Generally those with a
poor credit score will pay higher interest rates than those with
excellent credit ratings.
The difference in the amount of interest charged on one of the more
popular programs is more than $5000 when comparing 4% to 6% rates. Due to
the way interest rates are compounded, this amount is possible when
getting such a large loan.
For example, it isn't uncommon these days for students and parents to
borrow as much as $100,000 to finance an undergraduate education. Even
though you make your interest payments when you are going to college (so
that it does not add to the balance to be repaid) the payment would be
$567 per month at a 6.8% interest rate. The annual amount you will pay
for interest will be almost sixty-six hundred dollars.
Reducing that interest rate to 5% (the official rate for a need-based
Perkins loans) lowers those numbers to $417 and $4,820 and do not forget
that the example we have shown is assuming repayment begins right away.
Deferring payment until six months after leaving college, the most
general scenario, will result in much higher amounts unless the interest
is deferred or subsidized.
When using a co-signer who has a good credit score, you are more apt to
get better interest rates and pay less over the life of the loan. Run
through some sample scenarios by using a loan calculator such as those
available online. The information detail in this article will form a
crucial part of any student loan consolidation info.

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