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I am in the process of taking out a loan for school, and was wondering which option is best. Taking out a variable interest rate loan at 3.25% + LIBOR with deferred payment or taking out a fixed interest rate at 6.75% also deferred payment. It is a $50,000, on a 10 year repayment plan. I know the variable rate is a lot lower but do you guys think it will be higher in the long run? I also have options to do fixed payments while in school. Any suggestions would be great. I am just wondering which option you guys would chose when taking out loans, and what is the best option.
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According to a recent interview with Mark Carney, Chairman of the Bank of England and head of G20, who expects to raise interest rates by the end of 2014 due to 'worry about the extent of personal indebtedness.' Mortgages have been creeping up in the USA and some of the interest rates being charged on CCs are startling to anyone who misses a couple of payments.
What is your plan to pay off this $ 50,000. loan? Approximately $ 710. for 120 months? Do you see future income minus expenses allowing for higher payments or extra payment? When I run it through a Student Loan calculator, I conclude approximately $ 35,000. in interest resulting in total cost $ 85,000. ouch! -
The answer is easy - Fixed. You must assume that rates will be going up and if this is the case (it is) then fixed is the only answer.Comment
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It is hard to gauge my future expenses, so I do not know if I will be able to put higher payments in paying it off. The plan is to pay the 710 for 120 months, so I am not sure whether it is worth taking a risk with the variable rate. I know if I can pay it off right away it might be beneficial. I know locking down my rates is a safer bet, but like to see what others opinions are. Thanks for the responses.Comment
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