Interest rate and other fees

APR (Annual Percentage Rate)Federal law requires that lenders provide aTruth in Lending Act disclosure to consumers.This act requires the lender to disclose an annualpercentage rate, or APR. The APR tells you the
true cost of your loan. While the APR may not always include all costs, it does include the rate of interest being charged and all fees collected at the time the loan is made, so it is a reasonable indicator of the cost of your loan.
Other Fees
Some lenders charge additional fees, besides interest, for the privilege of borrowing money. Generally, these additional fees are a percentage of the loan amount that is deducted from the amount you receive, and they are charged immediately upon your receipt of the loan proceeds. For example, if the lender assesses a fee
of 5% and the loan amount is $2,500, the fee will be $125 and you will receive $2,375. You must, however, pay back $2,500 to the lender. These fees are usually considered part of the finance charge;
or, more specifically, a prepaid finance charge. Other charges to be aware of include late charges, loan processing fees, and deferment and forbearance fees. Not all lenders assess these fees. The key to understanding the fees associated with your private student loan is to read the credit agreement, also known as a promissory note or note. This is a contract between you and the lender that says the lender will loan you money and you will repay it. Read it carefully, and do not hesitate to discuss it with the lender and your school financial aid administrator.

Related Post: