Banks provide loans at low rates to students, provided students are registered at a university or college and open an account with the bank of their choice. They will usually, but not always, require a deposit from a third party.
If you opt for the student loan option, do not hesitate to compare offers before choosing.
Pay attention to all the determining criteria: interest rate, application fees, repayment terms, deposit and insurance, and of course the proposed amount.
The figure you should take into consideration is the : Global effective rate including the interest rate retained, plus other related costs (insurance…). It is the rate that will allow you to compare the offers.
The student loan is considered a personal loan and therefore you can use the money as you see best.
Certainly the amount that will fall into your account will help you during your studies. But don’t forget that you will have to pay it back one day. Evaluate your future needs (rent, food, equipment…) and set an amount. You will have several repayment options available to you, so consider the pros and cons carefully.
Choosing The Bank
“The basic principle is to bring the competition into the game. You should not hesitate to go to different banks. The negotiation was quite simple for me: they came to my school, which means they were in demand and I had the advantage.” Julien
Julien had two imperatives: to start repaying only at the end of his studies, which is often proposed, and to be able to benefit from early repayment without charge, which is in any case guaranteed by law.
Elodie, spent a whole week looking for a loan: « I preferred banks that offered 80 or 100 euros to those with a high school degree and those that were partners of my school. » Elodie
In addition to a preferred interest rate, the student loan has other advantages. These can be partial (you only pay the interest and insurance) or total (you only pay the insurance). The second option is the most expensive, as it increases the amount of interest considerably. It is only at the end of the period, which usually coincides with the duration of your studies, that you will begin to repay the principal borrowed.
In addition, some banks offer a gradual release of the sum. The amount of interest is calculated from the moment the funds are released, this solution allows you to pay less interest. In addition, it will prevent you from spending too quickly and in any way this sum that is supposed to support you during the whole period of your studies.
The Amount Of The Loan
Student loans are granted at a particularly attractive interest rate, on average 2 to 3 points lower than that of traditional loans. The amount of the loan depends on the student’s needs, the length of his or her studies and his or her ability to repay the loan once he or she has entered the world of work. This amount can vary from 800 $ to 30,000 $.
“The money allowed me to finance registration, social security and housing. My mother used to send me 200 dollars a month for the rest, but I quickly realized that it wasn’t enough,” explains Elodie, who borrowed 7,000 dollars the first year. That’s why it’s important to evaluate your needs.
The Duration Of The Loan
Elodie will have finished repaying all her loans of a total of 45,000 dollars by 2025, five years after the end of her studies. “It’s a third of my budget at the moment,” the young engineer says. So it’s better to have a good idea of her future income.
Julien took a student loan of 15,000 dollars to be repaid over 10 years after graduation. “When I think back, I think it was too long; I was able to repay the loan in its entirety one year after leaving school.” He wanted to get rid of the credit as soon as possible, because it allowed him to get back to a zero debt ratio and the possibility of taking out a new loan on the best terms if he wanted to buy a car or an apartment.
It should be noted that some banks allow an extension of the deferment (if you don’t find a job right away at the end of your studies for example), within the limit of 4 to 7 years after taking out the loan.
The Government Guarantee
In some countries the State can stand as guarantor for students under the age of 28 on condition that the loan does not exceed 15,000 dollars. But this is not a right to credit. The risk is shared: 70% for the State and 30% for the bank.
The state guarantee can be offered by any banking institution, but it has a cost for the borrower: about 495 dollars for a credit of 15,000 dollars.
This system concerns on average 3,500 to 4,000 students each year. It is a credit freely usable by the student, he can pay his school, his rent or buy a car. The average loan is 8,500 dollars for a period of six years.