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October 8, 2005 10:42 AM   Subscribe

I am applying for an alternative student loan. I am confused about the difference between Prime and LIBOR, and I am confused about how to actually decide which lender to go with.

I am totally overwhelmed with decisions. My school -- a giant public institution -- is of no help to me. I have good credit. I am still an undergraduate, but I am in a BS/MS program, so I am going through graduate-level education. I have another two years in school, and I need to take out loans to live on.

I know how much I need and how I will pay it off. All I need to do is choose a lender.

Do any of you have extremely positive or extremely nightmarish experiences with certain lenders? Are there any particular benefits I should insist on? (No loan origination fees, etc) Is it better to have a 2% interest rate reduction after 48 consecutive on-time payments, or a 3.33% reduction of principal after 30?

Thank you in advance.
posted by jennyjenny to Work & Money (2 answers total)
 
At my institution, there were two authorized lenders, one of which rebated the origination fee. I found out about the rebate by making a phone call.

Failing that, see if there's an online community of incoming students (where someone is bound to be in a similar quandary).

LIBOR and Prime are similar, but to compare the two, you should give us which LIBOR rate you're offered. (weekly, 1-month, 12-month, etc.)

As far as your last query, the term of the loan, payment (and amortization) schedule, and interest rate are needed for a definitive answer. Any math, science, econ, or finance student should be able to spit out an appropriate model, once s/he has the data.
posted by Kwantsar at 11:15 AM on October 8, 2005


Is it better to have a 2% interest rate reduction after 48 consecutive on-time payments, or a 3.33% reduction of principal after 30?

It depends. If you post the specifics here (you don't need to list the amount actually to be borrowed - the principal), someone can give you a clear answer. I think you need to say:

(a) The number of payments to be made, and starting when (for example, 120 payments, starting in 12 months).

(b) Whether you expect to pay off the loan early, or not, or if you're not sure. (The reason it makes a difference is that if you pay off the loan early, after - say - 60 payments, the interest rate reduction is less useful than the reduction in principal.)

(c) The interest rate you expect to pay (roughly), and how that adjusts (is it fixed for a while, or not, for example).
posted by WestCoaster at 5:31 PM on October 10, 2005


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