07-25-2012 11:19 AM
I am looking for private funding for my undergraduate education and came across a line of credit option offered by my credit union, Unitus. They offer an interest rate of prime + a margin of 1.99%-3.99% right now, and I am wondering if this would be better than taking a loan from a bank. I was looking at either Chase or Sallie Mae as I have heard and read good things about both of them. Anyone have advice on which way to go? I think the line of credit is a good idea because I will only have to borrow what I need each term, so interest won't grow as fast. Thanks.
07-25-2012 10:36 PM
First, have you exhausted any federal student loans available to you? As well as any grants/scholarships you might qualify or apply for? If not, do that first. Federal loans have a lot more protections and options for delaying payment if you hit a rough patch, as well as forgiveness options for certain professions.
Next, I would try to grab something with a fixed rate if you can. Unless you plan to pay these loans off fairly quickly, expect the Prime Rate to go up over the life of the loan. it can't go much lower after all. As far as the amount you borrow, I think you can opt to have your financial aid office return any overpayment to the lender (thereby reducing the amount you borrow) rather than taking the difference as a check. At least this is the case with federal loans. So you should be able to borrow the right amount either way you go.
Past that, go with an institution that you like to work with. A lot of folks have Sallie Mae horror stories. They took over one of my federal loans and I've had a couple mishaps with their auto-pay system that would have caused a late payment if I didn't watch the account like a hawk. But that experience isn't universal.
07-26-2012 03:51 PM
I used up all of my federal loans and grants, and now I need about $7000 more per year. I am just trying to determine which loan to go with. Wouldn't the variable loan make sense right now since it is so low? I know it will go up in the future, but it seems like now is the best time to get one. A fixed rate is definitely more appealing so that I will know my interest rate, but I am trying to save as much money as possible.
07-26-2012 10:11 PM
How quickly do you plan to pay off the loan? If you anticipate paying them off quickly (next 2-3 years), then a variable rate would probably work in your favor. If you plan to take 10 years, then a fixed rate is probably to your advantage.