Are you a student considering taking out a loan to help finance your education? Before you start the loan process, it is important to become familiar with some loan-related terms that are commonly used. Understanding these terms can help you make the best decision for your financial situation. In this blog, we will discuss loan related terms that every student should know. We will cover topics such as loan types, repayment plans, interest rates, and loan forgiveness. Keep Reading to know more!
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It’s important to understand the Loan related terms associated with education loans so that you can make the best decisions when it comes to taking out and managing a loan. Here is a list of some of the key loan related terms that you should be familiar with.
Annual Percentage Rates
Annual percentage rate (APR) is among the most essential loan related terms that you must know before opting for an education loan. APR is basically termed as the annual rate charged for borrowing a loan, it is expressed as a percentage that represents the principal cost of funds over the term of the loan. This may include fees or additional costs associated with the transaction. It can be beneficial for you to compare the cost of borrowing from other loan lenders.
Interest
Interest is the cost of borrowing money, and the rate of interest you pay is based on the amount of money you borrow and the length of the loan. When you take out a loan, you will pay interest over the life of the loan, and it is important to understand how interest works when you are considering taking out a loan.
Principal Balance
The principal balance is the amount of money that you borrowed when you took out the loan. This does not include any interest or other fees that you may have paid on top of the principal. It is important to understand the principal balance of your loan as it will help you understand how much money you still owe.
Origination Fee
An origination fee is a fee charged by a lender for processing a loan. The origination fee may be a percentage of the loan amount or a flat fee. It is important to understand the origination fee when you are considering taking out a loan, as it can help you compare the cost of borrowing from different lenders.
Repayment Term
The repayment term is the length of time that you have to repay the loan. This is typically based on the amount of money you borrowed and the interest rate. It is important to understand the repayment term when you are considering taking out a loan, as it can help you compare the cost of borrowing from different lenders.
Capitalization
Capitalization is the process of adding unpaid interest to the principal balance of a loan. This can happen when interest payments are not made on time or when a loan is refinanced. It is important to understand capitalization when you are considering taking out a loan, as it can increase your total loan balance.
In-School Payment Method
In-school payment method is a type of loan repayment plan that allows borrowers to make payments while they are still in school. This can be a great option for borrowers who are still in school and need to manage their debt. It is important to understand the in-school payment method when you are considering taking out a loan, as it can help you manage your debt while still in school.
Cosigner
A cosigner is someone who agrees to be held responsible for a loan if the borrower defaults. A cosigner may be necessary if the borrower does not have a good credit score or if the loan amount is large. It is important to understand the cosigner when you are considering taking out a loan, as it can help you qualify for a loan when you otherwise may not.
Loan Servicer
A loan servicer is a company that is responsible for managing a loan after it has been issued. The loan servicer is responsible for collecting payments, managing the loan balance, and helping borrowers with any questions or issues related to the loan. It is important to understand the loan servicer when you are considering taking out a loan, as it can help you manage your loan.
Student Loan Eligibility Requirements
Student loan eligibility requirements for Indian students vary greatly depending on the type of loan, the lender, and the student’s individual circumstances.
- Generally, Indian students must meet certain income criteria in order to qualify for a student loan.
- You must have a good academic record, a stable source of income, and a valid Indian ID card.
- Additionally, you must show that you will be able to repay the loan and that you have a good credit history.
- Income criteria for Indian students vary depending on the type of loan and the lender. Generally, students must earn at least a minimum salary to qualify. For example, some lenders require students to make a minimum of $30,000 a year. Other lenders may require students to have a minimum of three years of work experience.
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Documents Required
In addition to learning about loan related terms, you are also required to know more about the documents required. When applying for a student loan, you will need to provide certain documents to verify your identity and your eligibility.
- This typically includes a valid government-issued photo ID, such as a driver’s license or passport,
- Proof of enrollment in an eligible college or university.
- Proof of financial need, such as income tax returns or bank statements.
- Transcripts,
- Test scores,
- letters of recommendation.
It is important to read the loan application carefully and submit all of the required documents in a timely manner to avoid delays in the loan process.
FAQs
The eligibility requirements for student loans vary from lender to lender. Generally, you must have a good credit score, a stable income, and no outstanding loans. It is best to contact the lender directly to learn more about their specific requirements.
The interest rate you receive on your student loan will depend on several factors, including your credit score, the type of loan, and the lender you choose. It is best to compare different lenders to find the lowest interest rate possible.
The repayment term for student loans varies from lender to lender. Generally, most lenders offer repayment terms of up to 10 years. It is important to review the terms of your loan before signing any documents to ensure you understand the repayment timeline.
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