Your student loan interest rate dictates how much money you’ll pay the lender each month and over the life of the loan, making it one of the most important terms to consider when borrowing money for college. The lower your interest rate, the less money you’ll spend on financing charges during repayment – and vice versa.

College costs alone are enough of a burden on young Americans, so it’s important to get the lowest interest rate possible if you need to borrow a private student loan. Here are six ways to get a competitive student loan rate so you can set yourself up for financial success after graduation.

Work on Building Your Credit Score

Private student loan lenders determine your interest rate in part based on your credit history. The higher your credit score, the better your chances of locking in a low student loan interest rate. Conversely, it can be difficult to get a competitive rate if you have a less established credit history. Here are a few steps you can take to improve your credit score:

  • Request a copy of your credit report. You can get a free copy of your credit report from all three major credit bureaus – Equifax, Experian and TransUnion – on Pulling your credit report will not impact your credit score. Check your credit report for errors, and dispute them through the relevant credit bureau if necessary.
  • Make timely debt payments. Your on-time payment history makes up 35% of your FICO score, which is the scoring model used by many lenders when issuing credit. It’s important to pay all of your bills by the due date each month to avoid a negative mark on your credit history.
  • Open a secured credit card. Also known as a credit-builder card, secured credit cards allow you to borrow money against a cash deposit. These are easier to qualify for than traditional unsecured credit cards, and they can help you establish an on-time payment history and improve your mix of credit profiles.
  • Pay down credit card debt. Your credit utilization rate is the amount of credit card debt you have compared with the revolving credit line you have available. It’s another significant factor of your credit score, so you should aim to keep your credit utilization below 30% to establish good credit.
  • Become an authorized user. If you have a family member with excellent credit, he or she may be willing to add you as an authorized user on a credit card account. This would add the account to your credit history, which can help boost your credit score. Just be sure that both you and the account holder are using the card responsibly, making on-time payments and keeping the credit utilization low.

If you’ve taken the measures to raise your credit score to about 740 or above, then you’ll be eligible for some of the most competitive student loan interest rates. With very good or better credit, you may be able to get a low interest rate on a student loan without a co-signer.

Apply With a Co-Signer

Many college students – especially young undergraduates who don’t yet have an established career – haven’t had the opportunity to build a robust credit history that can guarantee the lowest private student loan rates. In this case, it may be best to enlist the help of a co-signer, such as a trusted friend or relative.

Ideally, your co-signer should have very good or excellent credit to help you qualify for the lowest student loan rates possible. But be smart: Your co-signer will be equally responsible for repaying the loan, so you’ll need to make sure you’re capable of making monthly payments or the burden will fall on the co-signer.

Many private student loan lenders offer a co-signer release clause, which allows you to remove the co-signer from the loan after making a set number of on-time monthly payments. Choosing a lender that offers a co-singer release may make it easier to find someone who is willing to co-sign on your student loan.

Shop Around With Multiple Lenders

When it comes to borrowing a private student loan, shopping around can pay off. Most lenders let you get prequalified with a soft credit inquiry, which shows you the estimated terms without impacting your credit score. You can prequalify with multiple lenders to compare offers so you can find the lowest interest rate for your financial situation.

Once you choose the loan offer that’s best for you, you’ll begin the application process, which will result in a negative but temporary mark on your credit report via a hard inquiry. Prequalification won’t hurt your credit score, but it doesn’t necessarily guarantee you’ll be approved when you formally apply.

See Whether You Qualify for Interest Rate Discounts

Check with private student loan lenders whether you’re eligible for a discounted interest rate. Here are some common types of student loan rate discounts offered by private lenders:

Autopay discount. As with federal student loans, many private student loan lenders offer an interest rate discount if you enroll in automatic payments through your bank, usually 0.25 or 0.5 percentage point off your rate. You can set up autopay with your bank account and routing numbers, which can be found on your checks or within your mobile banking app.

Loyalty discount. Some private student loan lenders may discount your interest rate if you already have a bank account. One such lender is Citizens Bank, which offers a 0.25 loyalty discount if you have a qualifying account, such as a checking or savings account, auto loan, mortgage or credit card, among others.

Graduate discount. Once you’ve graduated, you may be able to get an interest rate discount through your student loan lender. Other lenders may offer a rebate – for example, Ascent offers a 1% rebate on your original loan amount upon graduation.

Choose a Shorter Loan Term

As with most other loans, student loan interest rates tend to be lower for shorter-term loans than for longer-term loans. If you can afford the monthly payments on a five-year student loan rather than a 10-year loan, you could potentially lock in a lower interest rate, get out of debt faster and pay less money over time since you’re paying more toward the principal each month.

Take a look at this example of paying off $5,000 in student loan debt at a shorter term versus a longer term to see the potential lifetime savings:

Repaying $5,000 Worth of Student Loan Debt
Loan length 5 years 10 years
Interest rate 6.25% 7.5%
Monthly payments $97 $59
Total interest paid $835 $2,122

Before committing to a shorter repayment term, be sure to use a student loan calculator to estimate your monthly payments. It’s important that you’re able to keep up with your student loan payments to avoid late fees and a negative mark on your credit score.

Start Off With a Variable Rate

Private student loan interest rates can be either fixed or variable. With a fixed interest rate, your terms stay the same while you repay the loan. And with a variable rate, your interest rate (and monthly payments) can change over time based on broader economic conditions.

While fixed interest rates offer more stability in the long term, variable interest rates often have a lower initial rate, allowing you to save money in the short term. Depending on the lender, your variable rate may adjust monthly, quarterly or annually. Before choosing a variable-rate student loan, be sure to read the loan agreement carefully to fully understand the risk and stay out of default.

If you’re worried about your variable rate rising, you can always refinance to a fixed-rate student loan down the line. Most student loan lenders don’t charge fees for refinancing, so it doesn’t hurt to use this strategy. However, you will need to apply again for refinancing, which will impact your credit score.

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