Should I take try and get a bank loan to pay off my student loan?
Question by steven: Should I take try and get a bank loan to pay off my student loan?
My student loan is variable interest and sits at 12.25% right now. I owe 11,100$ on it. Would it be better for me to try and get a bank loan to pay it off so that I’m dealing with the bank instead of the Sally Mae loan?
Best answer:
Answer by bluebell
It would be good for you to find a lower rate of interest.
Find out from banks and local credit unions what their rate of interest is for a personal loan. When you have found the best rate, ask there about the possibility of a loan. If that is credit union, you will need to join up as a member and start saving there, ideally every week. After about 10 weeks you may apply for a loan, and by then you will have created a “history” with them for reliability, and getting the loan is virtually assured. You need to repay it (ideally weekly) over 5 years. A loan this size would cost approx. $ 65 weekly in my credit union over 5 years, or $ 95 weekly over 3 years.
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Because the bank is taking on so much added risk in this situation, they will charge a much higher interest rate than on a normal loan, and certainly a much higher interest rate than you would pay through the federal student loan program. Often the bank will ask for a co-signer as well, which puts financial strain on that person because if you don’t pay back your loan they are liable for the full amount.
You can try, however you are aware that getting a personal loan is MUCH harder than getting a mortgage and basically requires perfect credit..right? Also, the interest you pay right now is a tax deduction. You would lose that with a bank loan.
12.25% is a lot given how low interest rates are these days. Refinancing sounds like a good idea in your case as long as the interest rate offered by your bank or some other place is lower than the rate you’re paying now. If you get a fixed rate for say 6%, you could work with your bank on a monthly payment amount that suits your needs.