Over the past week, the average rate on private student loans with a fixed rate of 10 years has fallen. This fall in interest rates is good news for borrowers interested in obtaining private student loans to fill a gap in college funding.

According to Credible.com, the average fixed rate on a 10-year student student loan from October 4th to October 8th was 6.00%. For a five-year floating rate loan, it was 3.14%. This applies to borrowers with a credit score of 720 or greater who have prequalified on the Credible.com Student Loans Marketplace.

Related: The best private student loans

Fixed rate loans

The average fixed rate on 10 year private student loans fell 0.18% to 6.00% last week. In the previous week, the average was 6.18%.

Borrowers in the student loan market can now receive a lower interest rate than they were last year. At that time last year, the average fixed rate on a 10 year loan was 6.71%, 0.71% above today’s rate.

A borrower funding private student loans of $ 20,000 at today’s average fixed rate would pay about $ 222 per month and about $ 6,645 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable Rate Loans

The average floating rate on five-year loans fell 0.22% last week to 3.14%.

In contrast to fixed interest rates, variable interest rates fluctuate over the term of the loan. Floating rates can start lower than fixed rates, especially during times when interest rates are generally low, but they can rise over time.

Private lenders often offer borrowers the option to choose between fixed and floating rates. Fixed rates may be the safer choice for the average student, but if your income is stable and you plan to pay off your loan quickly, choosing a variable loan can be beneficial.

Financing a $ 20,000 five year 3.14% private loan would yield approximately $ 361 per month. A borrower would pay a total of $ 1,637 in interest over the life of the loan. However, the rate in this example is variable and can move up or down each month.

Related: How to get a private student loan

How your interest rate is determined

Lenders who offer private student loans usually offer both fixed and floating rates. These prices are partly based on your creditworthiness. In general, the higher your credit rating, the lower the interest rate you will get. But credit history, income, the degree you’re working on, and your career can all all play a part in the interest rate you get.

How to get a private student loan

Private student loans can be a good option if you are reaching or otherwise not eligible for the annual federal student loan limits. You should consider a state student loan as your first option, as interest rates are generally lower and you’ll enjoy more generous repayment and waiver options than a personal loan. For example, the federal student loan interest rate for the 2021-22 school year is 3.73%.

Generally, to get a personal student loan, you must apply directly through a non-state lender such as a bank, credit union, or online business. You may also be able to get a private student loan through a nonprofit, government agency, or college.

In general, if you are a bachelor with bad credit, you will need to apply to a co-signer who can meet the lender’s credit requirements.

You should consider the following when applying for a private student loan:

• Make sure you qualify. Private student loans are credit-based, and lenders typically require a credit score of over 600. For this reason, having a co-signer can be especially beneficial.
• Apply directly through lenders. You can apply directly on the lender’s website, by email, or by phone.
• Compare your options. Take a look at what each lender is offering and compare the interest rate, term, future monthly payment, commitment fee, and late payment fee. Also, check to see if the lender offers co-signer approval so that the co-borrower can eventually get out of the loan.

Shopping for private student loans

When buying a personal loan, consider the total cost of the loan, including the interest rate and fees. You can also consider the type of assistance that each lender offers when you cannot afford your loan payments.

If you have good or excellent credit, you have a better chance of getting the best interest rates.

How Much Should You Borrow? Experts generally recommend not borrowing more than you will earn in the first year after college. How much can you borrow? Some lenders limit the amount you can borrow each year while others don’t. When looking for a loan, find out from the lenders how the loan is paid out and what costs it covers.