Basic Questions to Ask when Choosing a Private Loan
- 1. What is the principal amount that I must repay?
- 2. What is the loan’s interest rate?
- 3. What is the annual percentage rate (APR)?
Important Fact: The APR is the total cost of a loan including the interest rate and any fees, expressed as an annual percentage of the Principal Amount that would be paid for the life of the loan.
- 4. What fees must I pay when the loan is disbursed?
- 5. What is the minimum monthly payment?
- 6. How long do I have to repay this loan?
- 7. What is the total amount I will repay?
- 8. Is the interest rate fixed or variable?
Important Fact: A fixed interest rate does not change. Variable interest rates change over the life of the loan. Normally, as the rate varies, the monthly payment amount also changes.
- 9. When can the interest rate change?
Important Fact: Variable interest rates are tied to a common market index. As the index goes up and down, your interest rate (and monthly payment) goes up and down, too. The change can occur monthly, quarterly or annually. Example: The interest rate is indexed to the Prime Rate published in the Wall Street Journal and changes monthly.
- 10. Is there a cap on the interest rate?
Important Fact: A cap on the interest rate prevents the variable interest rate from going above a certain level. Most private educational loans do not have interest rate caps.
- 11. What will my monthly payment be if the interest rate hits its cap?
Important Fact: This is the most you will have to pay each month if the interest rate increases to the maximum level.
- 12. Do I pay interest and principal while I’m in school?
Important Fact: Some loans do not require you to pay principal or interest while you are a full-time student or during grace periods. The interest that accumulates during the grace period is added to the amount you must repay. Example: Principal and interest payments are not due while you are in school or during the six month grace period.
- 13. How long is the grace period?
Important Fact: The grace period is the number of months that you do not have to make principal and interest payments.
- 14. Do I pay a penalty if I repay the loan early?
Important Fact: Some loans charge you a prepayment fee to repay the principal balance early; be aware if your loan requires one.
- 15. What if I have trouble repaying the loan?
Important Fact: Some lenders may permit you to defer payments if you are having financial difficulties. Ask if this option is available.
- For questions or concerns regarding the Private loan process, students and parents should contact Student Financial Services at 1-866-705-0200 or email us at sfs@colum.edu
