Understanding Private Loans Default Prevention. Agenda Essential loan language Variable rate...
48
Understanding Private Loans Default Prevention
-
Upload
morgan-jowell -
Category
Documents
-
view
213 -
download
0
Transcript of Understanding Private Loans Default Prevention. Agenda Essential loan language Variable rate...
Understanding Private Loans
Default Prevention
Agenda Essential loan language Variable rate language
♦ Types of indexes
Language for all types of loans Dissect an interest rate
♦ Variable rate history
Finding the best deal
What’s In It For You?
Improve discussion with borrowers Better understanding of loans and terms Less stress
Loan Language
APR Guarantee Fees
Origination
Capitalization Margin
LIBOR CapAdjustment
Period
T-BillPoints Prime
Negative Amortization Variable
Know Another Language?
Review the FAFSA, determine EFC, then send the AL through your FAM system.
Is your school Direct or FFEL? Do you process EFT through ELM? Do you award FWS, Pell and FSEOG?
Loan Language Essentials
Interest Rate
A charge for a loan♦ Shown as a percent of borrowed amount
One of many ways to charge for a loan♦ Up-front fees♦ Capitalization frequency
Interest Rate
Interest♦ Student loans — monthly♦ Credit cards — daily or monthly♦ Earlier payments = less interest
How payment is applied♦ Fees♦ Interest
• Lowest interest rate balance• Higher interest rate balance
♦ Principal
Interest Rates and Debt
Secured♦ Car♦ Home
Unsecured♦ Credit card♦ Personal loan♦ Education loan
What’s in an Interest Rate
Cost of funds
+ Operations
+ Inflation
+ Risk
+ Profit
Borrower rate
Index
Margin
Dissecting an Interest Rate
Credit CardCost of Funds1 2.38%Inflation Rate2 2.50%Operations3 0.50%Loan Losses4 4.85%Total Lender Cost 10.23%Profit 2.94%Loan Rate5 13.17%
1,4,5 Bank sample June 2006 2Federal Reserve 3Federal Reserve Bank Functional Cost and Profit Analysis.
APR
Annual Percentage Rate (APR)♦ Annual basis♦ Up-front charges
• Guarantee fees• Origination fees
♦ Compounding frequency Can make shopping easier
♦ Price tag
Index Types
Index and borrower rate T-Bill LIBOR Prime rate
Index
Index ♦ Wholesale price
• Rate = price lender pays for money• Name = where lender obtains money
Borrower rate ♦ Retail price
• Price borrower pays for money
T-Bill
Treasury bill Government borrowing
♦ U.S. deficit♦ Rate set by the government♦ Price it will pay to borrow money
Terms: 13 and 26 weeks
LIBOR
London Interbank Offered Rate♦ Rate international banks in London charge each other for loans
♦ Can take place anywhere
♦ Recorded in London
♦ Similar to NYSE
Index has been used for 18 years
Prime Rate
Retail♦ Credit-worthy customers
• Secured
Private loans♦ Wholesale price♦ Mark-up/margin added
• Borrowers lack credit history• Unsecured
Margin
Allowance to cover expenses♦ Rate the borrower pays 10%
♦ Index (cost of funds) -4%
♦ Margin (covers expenses) 6%
Index + Margin
Loan Type Index MarginBorrower
Rate
LIBOR Index 5.36% 7.89% 13.25%
Prime Index 8.25% 5.00% 13.25%
T-Bill Index 4.61% 8.64% 13.25%
What the Lender pays
Lender Revenue
What the customer pays+ =
Floor and Cap
Floor♦ Lowest rate♦ Rarely used
Cap♦ Highest rate♦ Limits consumer risk♦ Also called ceiling
Cap Example
Prime + 3% with a cap of 12%♦ If prime rate is 14% + 3% margin ♦ Rate is ____%
Adjustment Period
How often rate changes♦ Annually, quarterly, monthly
Purpose♦ Easier budgeting♦ Keeps lender’s margin/markup level
Adjustment Period Cap
Maximum rate change each period Purpose
♦ Limits borrower risk♦ Easier to budget♦ Benefit when rates are going up♦ Not a benefit when rates decline
Variable Rate Payment Risk
Loan Amount $20,000
Loan Rate 5.00%
Cap 25.00%
Payment Range $212 - $455
Possible Increase 115%
Based on a 10-year loan term.
Loan Origination Fees
Paid up-front Usually a percentage of the loan amount Origination
♦ Fee to start a loan♦ Adds to the total cost of the loan♦ Included in APR
Points
Point = % of loan amount One point = 1%
♦ Origination fee of 2% ♦ Two points
♦ $25,000 x 2 points = $500
Mortgage, home equity♦ student loans
Amortization
Amortize = Pay off Reduction of debt
♦ Regular payments of • Interest (cost of the loan)• Principal (actual amount borrowed)
Result = Loan balance decreases
Negative Amortization
Increasing debt Payments do not cover principal and interest Result = Loan balance grows Read the fine print Monthly payments remain fixed throughout the life of the loan. Any fluctuation in the interest rate will be reflected in the length of repayment, not in the monthly amount.
Capitalization
Adding interest to loan balance Capital = Money borrowed Interest is paid on capital “Capitalized” = when interest becomes part of the capital
What’s a Better Deal?
Low fee or a low rate $10,000 loan with 10-year term
♦ 1% fee = $100♦ 1% rate discount = $626
A lower rate saves more than a low fee Similar to car loan
$626 savings based on an interest rate comparison of 7% and 8% on a 10-year loan term.
The Right Choice
LIBOR Prime rate T-Bill
?
Indexes Mirror Each Other
0%
5%
10%
15%
20%
25%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Years
Inte
rest
Rat
e
Prime
90 Day Tbill
3 MO LIBOR
Source: St. Louis Federal Reserve Bank and Federal National Mortgage Association
Rates Mirror Each Other
Margin compensates for index variety
Any index
+ Margin
= Similar loan rates
Private Loan ChoicesLender Index Margin Cap
CurrentRate Fees Term
# 1 LIBOR 5.00% None 10.36% 4.00% 15
# 1 LIBOR 5.00% None 10.36% 6.25% 15
# 2 PRIME 0.50% None 8.75% 0% 15
# 2 PRIME 4.75% None 13.00% 0% 15
# 3 PRIME 1.00% None 9.25% 0% 15
# 3 PRIME 1.00% None 9.25% 3% 15
# 4 LIBOR 4.50% None 9.86% 2% 15
# 4 LIBOR 4.50% None 9.86% 9.90% 15
# 4 LIBOR 5.50% None 10.86% 2% 15
# 4 LIBOR 5.50% None 10.86% 9.90% 15
# 5 LIBOR 1.60% 12.00% 6.96% 3.75% 15
# 5 LIBOR 1.60% 12.00% 6.96% 7.00% 15
# 5 LIBOR 2.80% 12.00% 8.16% 3.75% 15
# 5 LIBOR 2.80% 12.00% 8.16% 7.00% 15
# 5 PRIME 0.00% 12.00% 8.25% 3.75% 15
# 5 PRIME 0.00% 12.00% 8.25% 7.00% 15
# 6 PRIME 0.00% None 8.25% 0% 15
# 6 PRIME 0.00% None 8.25% 9% 15
# 6 PRIME 5.00% None 13.25% 0% 15
# 6 PRIME 5.00% None 13.25% 9% 15
# 7 LIBOR 2.25% None 7.61% 0% 15
# 7 LIBOR 2.25% None 7.61% 8% 15
# 7 LIBOR 8.00% None 13.36% 0% 15
# 7 LIBOR 8.00% None 13.36% 8% 15
# 8 LIBOR 4.00% 18.00% 9.36% 0% 15
# 9 PRIME 6.50% None 14.75% 0% 15
# 9 PRIME 6.50% None 14.75% 3% 15
# 10 PRIME 4.50% None 12.75% 0% 15
# 10 PRIME 7.75% None 16.00% 0% 15
Lender Index Margin CapCurrent
Rate Fees Term A LIBOR 1.00% None 6.36% 0% 20
A LIBOR 1.00% None 6.36% 8% 20
A LIBOR 2.75% None 8.11% 0% 20
A LIBOR 2.75% None 8.11% 8% 20
B PRIME -0.50% None 7.75% 0% 20
B PRIME -0.50% None 7.75% 9% 20
C LIBOR 3.75% None 9.11% 0% 20
C LIBOR 3.75% None 9.11% 7% 20
D PRIME 0.00% None 8.25% 0% 20
D PRIME 4.50% None 12.75% 0% 20
E LIBOR 0.00% None 5.36% 6.50% 20
E LIBOR 0.00% None 5.36% 10.50% 20
E LIBOR 3.50% None 8.86% 6.50% 20
E LIBOR 3.50% None 8.86% 10.50% 20
F LIBOR 3.85% None 9.21% 2% 20
G 3 Mo T-Bill 3.40% None 8.01% 6.50% 20
G 3 Mo T-Bill 3.40% None 8.01% 8.00% 20
H PRIME 1.25% None 9.50% 0% 20
H PRIME 1.25% None 9.50% 8% 20
H PRIME 2.25% None 10.50% 0% 20
H PRIME 2.25% None 10.50% 8% 20
I LIBOR 1.80% None 7.16% 0% 20
I LIBOR 1.80% None 7.16% 9% 20
J LIBOR 7.50% None 12.86% 0% 20
J LIBOR 7.50% None 12.86% 9% 20
K LIBOR 4.25% None 9.61% 2% 20
K LIBOR 4.25% None 9.61% 9% 20
K LIBOR 9.95% None 15.31% 2% 20
K LIBOR 9.95% None 15.31% 9% 20
L LIBOR 3.25% None 8.61% 6.50% 20
L LIBOR 3.25% None 8.61% 10.50% 20
M PRIME 1.00% None 9.25% None 20
M PRIME 5.00% None 13.25% 0% 20
Comparison Shopping
Determine amount to borrow Identify loan choices Interest rate index Up front costs
♦ Points, fees, etc. Term Total cost of loan
♦ Principal, interest, fees
Comparison Chart
Index Name 91 Day Tbill Prime 3 mo LI BOR
Index Rate 1.76% 4.75% 1.88%
Margin 3.25% 1.00% 3.20%
Current Rate 5.01% 5.75% 5.08%
Floor 3.00% None 1.00%
Cap None 25.00% 18.00%
Adjustment Period Quarterly Annually 6 months
Origination Fee % 4.00% None 8.00%
Loan Amount $15,000 $15,000 $15,000
Origination Fee $600 $0.00 $1,200
Guarantee Fee % 1.00% 5.50% -
Guarantee Fee $150 $75 -
Other Fees $75 $0.00 -
Total Fees $825 $75 $1,200
Term 20 years 20 years 20 years
Payment Range $99 to ??? $105 to $315 $100 to $232
Rate Information
Fees
Considerations
Variable Rate♦ Index (base)♦ Starting rate♦ Margin♦ Floor♦ Cap♦ Adjustment frequency♦ Payment range
Private Loan ChoicesLender Cosigner Index Margin Adjustment Cap Current Rate Term FeesLoan # 1 Yes LIBOR + 3.85% Quarterly None 5.75% 20 4.0%Loan # 2 Yes LIBOR + 3.85% Quarterly None 5.75% 20 2.0%Loan # 3 Yes 3 mo LIBOR + 3.2% Quarterly None 5.10% 20 12.9%Loan # 4 Yes 3 mo LIBOR + 3.2% Quarterly None 5.10% 20 7.5%Loan # 5 Optional 91 Day T-Bill + 3.15% Annually None 4.88% 20 4.0%Loan # 6 Optional Prime + 0.0% 6 Months 18% 4.75% 20 7.5%Loan # 7 Yes LIBOR + 2.90% Quarterly None 4.65% 20 9.0%Loan # 8 Yes LIBOR + 2.90% Quarterly None 4.65% 20 4.0%Loan # 9 Yes 52 Week T-Bill + 3.10% Annually None 4.60% 20 5.0%Loan A Yes LIBOR + 5.25% Quarterly None 7.15% 15 5.0%Loan B Yes Prime + 2.00% Monthly None 6.75% 15 NoneLoan C Yes Prime + 1.00% Monthly None 5.75% 15 9.0%Loan D Yes Prime + 1.00% Monthly None 5.75% 15 NoneLoan E Yes Prime + 0.5% Quarterly 25% 5.25% 15 NoneLoan F Yes 91 Day T-Bill + 3.25% Quarterly None 4.98% 15 4.0%Loan G Optional Prime + 0.50% Monthly None 4.83% 15 3.0%Loan H Yes 91 Day T-Bill + 3.50% 6 Months None 4.23% 15 8.0%Loan I Yes 91 Day T-Bill + 3.50% 6 Months None 4.23% 15 4.0%
Lender #1 #2 #3
Index Name 91 Day Tbill Prime 3 mo LI BOR
Index Rate 1.76% 4.75% 1.88%
Margin 3.25% 1.00% 3.20%
Current Rate 5.01% 5.75% 5.08%
Floor 3.00% None 1.00%
Cap None 25.00% 18.00%
Adjustment Period Quarterly Annually 6 months
Origination Fee 4.00% None 8.00%
Loan Amount $15,000 $15,000 $15,000
$ Origination Fee $600 $0.00 $1,200
Guarantee Fee 1.00% 5.50% -
$ Guarantee Fee $150 $75 -
Other Fees $75 $0.00 -
Total Fees $825 $75 $1,200
Rate Information
Fees
Alternative Loan Cost Comparison
?
What is a Good Deal?
Affordable payment♦ Fits in your budget
Competitive rate Reasonable fees Feeling like you got a fair deal
Finding the Best Deal
General loan criteria♦ Homes, cars, credit cards, etc.
♦ Most creditworthy = lower loan rate
♦ Least creditworthy = higher loan rate
♦ Private student loans
Private Loan ChoicesLender Index Margin Cap
CurrentRate Fees Term
# 1 LIBOR 5.00% None 10.36% 4.00% 15
# 1 LIBOR 5.00% None 10.36% 6.25% 15
# 2 PRIME 0.50% None 8.75% 0% 15
# 2 PRIME 4.75% None 13.00% 0% 15
# 3 PRIME 1.00% None 9.25% 0% 15
# 3 PRIME 1.00% None 9.25% 3% 15
# 4 LIBOR 4.50% None 9.86% 2% 15
# 4 LIBOR 4.50% None 9.86% 9.90% 15
# 4 LIBOR 5.50% None 10.86% 2% 15
# 4 LIBOR 5.50% None 10.86% 9.90% 15
# 5 LIBOR 1.60% 12.00% 6.96% 3.75% 15
# 5 LIBOR 1.60% 12.00% 6.96% 7.00% 15
# 5 LIBOR 2.80% 12.00% 8.16% 3.75% 15
# 5 LIBOR 2.80% 12.00% 8.16% 7.00% 15
# 5 PRIME 0.00% 12.00% 8.25% 3.75% 15
# 5 PRIME 0.00% 12.00% 8.25% 7.00% 15
# 6 PRIME 0.00% None 8.25% 0% 15
# 6 PRIME 0.00% None 8.25% 9% 15
# 6 PRIME 5.00% None 13.25% 0% 15
# 6 PRIME 5.00% None 13.25% 9% 15
# 7 LIBOR 2.25% None 7.61% 0% 15
# 7 LIBOR 2.25% None 7.61% 8% 15
# 7 LIBOR 8.00% None 13.36% 0% 15
# 7 LIBOR 8.00% None 13.36% 8% 15
# 8 LIBOR 4.00% 18.00% 9.36% 0% 15
# 9 PRIME 6.50% None 14.75% 0% 15
# 9 PRIME 6.50% None 14.75% 3% 15
# 10 PRIME 4.50% None 12.75% 0% 15
# 10 PRIME 7.75% None 16.00% 0% 15
Lender Index Margin CapCurrent
Rate Fees Term A LIBOR 1.00% None 6.36% 0% 20
A LIBOR 1.00% None 6.36% 8% 20
A LIBOR 2.75% None 8.11% 0% 20
A LIBOR 2.75% None 8.11% 8% 20
B PRIME -0.50% None 7.75% 0% 20
B PRIME -0.50% None 7.75% 9% 20
C LIBOR 3.75% None 9.11% 0% 20
C LIBOR 3.75% None 9.11% 7% 20
D PRIME 0.00% None 8.25% 0% 20
D PRIME 4.50% None 12.75% 0% 20
E LIBOR 0.00% None 5.36% 6.50% 20
E LIBOR 0.00% None 5.36% 10.50% 20
E LIBOR 3.50% None 8.86% 6.50% 20
E LIBOR 3.50% None 8.86% 10.50% 20
F LIBOR 3.85% None 9.21% 2% 20
G 3 Mo T-Bill 3.40% None 8.01% 6.50% 20
G 3 Mo T-Bill 3.40% None 8.01% 8.00% 20
H PRIME 1.25% None 9.50% 0% 20
H PRIME 1.25% None 9.50% 8% 20
H PRIME 2.25% None 10.50% 0% 20
H PRIME 2.25% None 10.50% 8% 20
I LIBOR 1.80% None 7.16% 0% 20
I LIBOR 1.80% None 7.16% 9% 20
J LIBOR 7.50% None 12.86% 0% 20
J LIBOR 7.50% None 12.86% 9% 20
K LIBOR 4.25% None 9.61% 2% 20
K LIBOR 4.25% None 9.61% 9% 20
K LIBOR 9.95% None 15.31% 2% 20
K LIBOR 9.95% None 15.31% 9% 20
L LIBOR 3.25% None 8.61% 6.50% 20
L LIBOR 3.25% None 8.61% 10.50% 20
M PRIME 1.00% None 9.25% None 20
M PRIME 5.00% None 13.25% 0% 20
How to Find the Best Deal
Separate private loans by term Sort by rate Divide into three sections
♦ Best credit♦ Average credit♦ Poor credit
Private Loan Choices
Lender Index Margin CapCurrent
Rate Fees Term Payment Total Cost
# 5 LIBOR 1.60% 12.00% 6.96% 3.75% 15 $10,390 $93 $16,768
# 5 LIBOR 1.60% 12.00% 6.96% 7.00% 15 $10,753 $96 $17,354
# 7 LIBOR 2.25% None 7.61% 0% 15 $10,000 $93 $16,799
# 7 LIBOR 2.25% None 7.61% 8% 15 $10,870 $101 $18,260
# 5 LIBOR 2.80% 12.00% 8.16% 3.75% 15 $10,390 $100 $18,046
# 5 LIBOR 2.80% 12.00% 8.16% 7.00% 15 $10,753 $104 $18,676
# 6 PRIME 0.00% None 8.25% 0% 15 $10,000 $97 $17,462
# 5 PRIME 0.00% 12.00% 8.25% 3.75% 15 $10,390 $101 $18,147
# 5 PRIME 0.00% 12.00% 8.25% 7.00% 15 $10,753 $104 $18,777
# 6 PRIME 0.00% None 8.25% 9% 15 $10,989 $107 $19,190
# 2
# 3
# 3
# 8
# 4
# 4
# 1
# 1
# 4
# 4
# 10
# 2
# 6
# 6
# 7
# 7
# 9
# 9
# 10
Lender
# 5
# 5
# 7
# 7
# 5
# 5
# 6
# 5
# 5
# 6
# 2
# 3
# 3
# 8
# 4
# 4
# 1
# 1
# 4 LIBOR 5.50% None 10.86% 2% 15 $10,204 $115 $20,715
# 4 LIBOR 5.50% None 10.86% 9.90% 15 $11,099 $125 $22,532
# 10 PRIME 4.50% None 12.75% 0% 15 $10,000 $125 $22,479
# 2 PRIME 4.75% None 13.00% 0% 15 $10,000 $127 $22,774
# 6 PRIME 5.00% None 13.25% 0% 15 $10,000 $128 $23,071
# 6 PRIME 5.00% None 13.25% 9% 15 $10,989 $141 $25,353
# 7 LIBOR 8.00% None 13.36% 0% 15 $10,000 $129 $23,202
# 7 LIBOR 8.00% None 13.36% 8% 15 $10,870 $140 $25,221
# 9 PRIME 6.50% None 14.75% 0% 15 $10,000 $138 $24,885
# 9 PRIME 6.50% None 14.75% 3% 15 $10,309 $143 $25,654
# 10 PRIME 7.75% None 16.00% 0% 15 $10,000 $147 $26,437
Lender
# 5
# 5
# 7
# 7
# 5
# 5
# 6
# 5
# 5
# 6
# 2 PRIME 0.50% None 8.75% 0% 15 $10,000 $100 $17,990
# 3 PRIME 1.00% None 9.25% 0% 15 $10,000 $103 $18,525
# 3 PRIME 1.00% None 9.25% 3% 15 $10,309 $106 $19,098
# 8 LIBOR 4.00% 18.00% 9.36% 0% 15 $10,000 $104 $18,644
# 4 LIBOR 4.50% None 9.86% 2% 15 $10,204 $109 $19,580
# 4 LIBOR 4.50% None 9.86% 9.90% 15 $11,099 $118 $21,298
# 1 LIBOR 5.00% None 10.36% 4.00% 15 $10,417 $114 $20,564
# 1 LIBOR 5.00% None 10.36% 6.25% 15 $10,667 $117 $21,058
# 4 LIBOR 5.50% None 10.86% 2% 15 $10,204 $115 $20,715
# 4
# 10
# 2
# 6
# 6
# 7
# 7
# 9
# 9
# 10
Lender Index Margin CapCurrent
Rate Fees TermAmount
Borrowed Payment Total Cost
# 5 LIBOR 1.60% 12.00% 6.96% 3.75% 15 $10,390 $93 $16,768
# 5 LIBOR 1.60% 12.00% 6.96% 7.00% 15 $10,753 $96 $17,354
# 7 LIBOR 2.25% None 7.61% 0% 15 $10,000 $93 $16,799
# 7 LIBOR 2.25% None 7.61% 8% 15 $10,870 $101 $18,260
# 5 LIBOR 2.80% 12.00% 8.16% 3.75% 15 $10,390 $100 $18,046
# 5 LIBOR 2.80% 12.00% 8.16% 7.00% 15 $10,753 $104 $18,676
# 6 PRIME 0.00% None 8.25% 0% 15 $10,000 $97 $17,462
# 5 PRIME 0.00% 12.00% 8.25% 3.75% 15 $10,390 $101 $18,147
# 5 PRIME 0.00% 12.00% 8.25% 7.00% 15 $10,753 $104 $18,777
# 6 PRIME 0.00% None 8.25% 9% 15 $10,989 $107 $19,190
# 2
# 3
# 3
# 8
# 4
# 4
# 1
# 1
# 4
# 4
# 10
# 2
# 6
# 6
# 7
# 7
# 9
# 9
# 10
Best
Lender
# 5
# 5
# 7
# 7
# 5
# 5
# 6
# 5
# 5
# 6
# 2 PRIME 0.50% None 8.75% 0% 15 $10,000 $100 $17,990
# 3 PRIME 1.00% None 9.25% 0% 15 $10,000 $103 $18,525
# 3 PRIME 1.00% None 9.25% 3% 15 $10,309 $106 $19,098
# 8 LIBOR 4.00% 18.00% 9.36% 0% 15 $10,000 $104 $18,644
# 4 LIBOR 4.50% None 9.86% 2% 15 $10,204 $109 $19,580
# 4 LIBOR 4.50% None 9.86% 9.90% 15 $11,099 $118 $21,298
# 1 LIBOR 5.00% None 10.36% 4.00% 15 $10,417 $114 $20,564
# 1 LIBOR 5.00% None 10.36% 6.25% 15 $10,667 $117 $21,058
# 4 LIBOR 5.50% None 10.86% 2% 15 $10,204 $115 $20,715
# 4
# 10
# 2
# 6
# 6
# 7
# 7
# 9
# 9
# 10
Lender
# 5
# 5
# 7
# 7
# 5
# 5
# 6
# 5
# 5
# 6
# 2
# 3
# 3
# 8
# 4
# 4
# 1
# 1
# 4 LIBOR 5.50% None 10.86% 2% 15 $10,204 $115 $20,715
# 4 LIBOR 5.50% None 10.86% 9.90% 15 $11,099 $125 $22,532
# 10 PRIME 4.50% None 12.75% 0% 15 $10,000 $125 $22,479
# 2 PRIME 4.75% None 13.00% 0% 15 $10,000 $127 $22,774
# 6 PRIME 5.00% None 13.25% 0% 15 $10,000 $128 $23,071
# 6 PRIME 5.00% None 13.25% 9% 15 $10,989 $141 $25,353
# 7 LIBOR 8.00% None 13.36% 0% 15 $10,000 $129 $23,202
# 7 LIBOR 8.00% None 13.36% 8% 15 $10,870 $140 $25,221
# 9 PRIME 6.50% None 14.75% 0% 15 $10,000 $138 $24,885
# 9 PRIME 6.50% None 14.75% 3% 15 $10,309 $143 $25,654
# 10 PRIME 7.75% None 16.00% 0% 15 $10,000 $147 $26,437
Guiding Students
Before Term Credit rating Index Fees Apply Confusion
Now Term Credit rating Apply
Guiding Students
1% rate discount vs. 1% fee discount Rates typically mirror each other Prepare for payment to change Pay off higher interest rate debt
♦ Credit cards♦ Private loans (if rate goes up) ♦ Deferment/forbearance options
Conclusion
1. Variable rate language
2. Types of indexes
3. Language for all types of loans
4. What is a good deal?
5. Guiding students
