April financial literacy month, and this blog is our blog chain financial literacy! In keeping with this spirit, I wanted to break some common student loan terms so that students and parents can be better informed about their student loan options.
The following are a few basic loan terms is indispensable to know when getting a loan for the first time:
Home – the total amount of the loan when you take it. Is interest calculated on this amount.
Origination fees – these are the fees charged by the lender "create" for the loan.
Interest – the amount charged with loan funds.
Financier interest – the amount of interest that is added to your master. This means that if you have 10,000 loan with $ 100 in interest, once capitalized interest your loan principal becomes $ 10,100. It is best to avoid drawing attention as being any interest that accrues after that based on this new principle, always higher balance, so you will end up paying more over time.
It is important to know the difference between federal and private loans so that you can keep track of who owns the loan. Know your loan from start saves a lot of time and stress later. Here's a brief explanation of each type:
Federal loans – federal loans are what students can receive based on their FAFSA loans are federally funded. These include Perkins, Stafford and graduate plus, plus. This, based solely on loans as well as credit.
Not granted based on your FAFSA information private loans – private sector loans, on the other hand, the supplementary funds must apply through family bank or lender.
These conditions are applicable "federal direct Stafford loan. When he gets a loan Exchange (sending money to your school) it begins to accrue interest. Most students choose to defer payments until after graduation, but interest continues to accumulate during this time.
The difference between subsidized and Unsubsidized loans is that the Government subsidize interest, so that you do not have to pay any interest due on the loan for the time I was in school. Unsubsidized loans accumulated interest during deferment, it is capitalized and then when you pay.
The first thing to note about these two rates are not the same. The basic interest rate, and what a lot of people use to judge a loan, is simply the amount charged by your lender for the use of funds. APR (annual percentage rate) is similar, but includes more than just attention. RPA not only takes into account the interest rate, but also any associated fees. This means that the amount actually will end up paying for a loan of $ XXXX. While low interest rates are good, comparing APRs of credit allows you to compare apples to apples and know which is really the best deal.
These are two types of interest rates. Fixed rates remain fixed for the duration of the loan. Variable rates are based on an index, such as LIBOR or Prime that is worldwide market-determined interest rates.
This concludes the first part of "financial literacy blog series". Check back next week for part 2 where you will be breaking down what is behind the interest rate! Stay tuned.
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