Frequently Asked Questions
- Applying For a Loan
Because interest rates are based on your credit history and background, it’s impossible to predict the exact rate of interest you will pay on your loan. However, LeveLend provides you with both the minimum and maximum interest rates that each loan offers. This way, you'll have an idea of what to expect.
If you're applying with a cosigner or have very strong credit yourself, you can expect something closer to the minimum interest rate.
With full deferment loans, your graduation date will affect the total cost and monthly payment of each loan because it changes the length of time that interest is accruing on the loan.
With principal deferment loans, your graduation date will affect the total cost and monthly payment of each loan because it changes the length of time that interest only (and not principal) is being paid on the loan.
The further away your graduation date, the longer your loan costs have to build up. This has an effect on the total cost of your loan and the size of your monthly repayment.
If you were to choose to begin immediate, full repayment (interest and principal) on your loan, then your graduation date will not affect the costs associated with your loan.
You can withdraw your application for a loan anytime before the loan funds have been released.
After applying for a loan, lenders will contact you (usually within a few days or weeks) to let you know whether you've been approved or not. If you are approved, you'll be offered an interest rate based on your credit history. Even after you accept the offer, you can still cancel as long as the funds have not yet been disbursed. Funds are usually disbursed between 1-3 weeks after you accept the offer.
- Repaying Your Loan
Most lenders will offer you three different repayment options. Here's a brief explanation of each option:
- Full Deferment – Full deferment lets you delay repayment on your loan until you graduate. While you’re in school, your loan will accumulate interest. The accumulated interest is added to the principal loan amount when you graduate, so you will end up paying off a bigger loan amount. Though costs are higher on this type of loan, it means you don’t have to worry about making payments while you're still taking classes. This is the most popular student loan option, but also the most expensive.
- Principal Deferment – Principal deferment requires you to make interest payments on your loan while you’re still in school. By making interest payments earlier, you will avoid having those interest charges added to your principal loan amount, resulting in a smaller loan overall. After you graduate, your payments will increase as you begin repayment on the principal amount. This is a less popular option than full deferment, but it will end up costing you less than a full deferment option.
- Immediate Repayment – Immediate repayment requires you to make full payments on the principal amount of your loan while you’re still in school. By beginning payment right away, you avoid the cost of loan capitalization (when accumulated interest is added to the principal). You also pay far less interest on the loan because you’re repaying the principal faster. While this is the least popular option of the three, it’s also the least expensive repayment method for your student loan.
The answer depends on whether your loan is a fixed-rate or variable-interest-rate loan.
If you have chosen a variable-interest rate loan, your interest rate can change. While the margin won't change, the interest rate may if the index used (LIBOR or Prime) changes. While each of these indexes has remained very constant over the last few years, there's no guarantee that they'll continue to do so.
If you have chosen a fixed-rate loan, the interest rate is guaranteed not to change over the life of the loan.
LeveLend recommends that you view the loan details of each loan you're interested in to see if a fixed-rate option is offered.
You can choose to repay your loan in a shorter period of time anytime without penalty. You can also change the deferment option you chose while you're still enrolled in school. However, you will not be able to extend the deferment period further than the timeframe stipulated by the original loan terms. Once you graduate and the grace period (usually six months) has passed, you will be expected to begin making full monthly payments.
- Loan Details
The repayment term refers to the amount of time you plan on taking to repay your loan.
Many borrowers choose the standard 15-year repayment term, but you can pay your loan back in less time without incurring a penalty.
The faster you repay your loan, the less interest you’ll pay, which makes it more affordable overall. However, when you choose to repay your loan faster, your monthly payments will be much higher. It’s up to you to decide what kind of repayment terms fit your situation best. Check the loan details of each lender to see what maximum repayment term they offer.
An index is used for all variable-interest loans. Variable-interest loans are loans whose interest rates fluctuate according to market forces. The loans listed on the LeveLend site are all variable-interest loans.
These types of loans have an index plus a margin. The index tells you which of two different interest rates is being used as the base rate, and the margin tells you how much more than that base rate you can expect to be charged.
The two different indexes are:
- LIBOR (London Interbank Offered Rate) – This is the interest rate at which large international banks are willing to lend each other money on a short-term basis. The LIBOR index is usually around 0.25%, and lenders add a margin rate (usually around 3%) to this index rate. The LIBOR is calculated every business day, but for student loans, lenders choose the one-month or three-month LIBOR, which means your interest rate could change every month or every three months, respectively.
- Prime – This is the interest rate used most commonly in the US banking system. The prime index has remained steady at 3.25% for over two years now. While this index may seem a lot higher than the LIBOR index, lenders using the prime index don't add a margin, so the overall prime rates are generally very competitive with the LIBOR.
Borrower rewards are incentives lenders offer to entice potential borrowers to choose their loan over a competitors’. While these rewards vary from lender to lender, the most common offer is an automatic debit payment discount. This discount offers a reduction on your interest rate when you sign up to have your monthly loan repayments automatically withdrawn from a banking account.
Lenders may also offer incentives such as a reduction in the principal amount of your loan when you graduate.
Check the loan details of each loan you're interested in to see the specifics of the borrower rewards offered. You'll have to meet certain criteria for each reward, so make sure to read the specifics.
The maximum deferral length is the period of time during which the lender will allow you to suspend payment on the loan principal and/or interest. Generally, most lenders will allow you to defer payment while you're still in school, with an additional six-month grace period after you graduate.
Make sure you check the maximum deferral length of the loan you're interested in by viewing the loan details provided on LeveLend.
Some lenders choose to have a third party company service their loans because it reduces the costs associated with administering these loans.
If the loan you choose is serviced by a third party, you will be making payments to (and communicating with) the company your lender has chosen to service your loan. This doesn't change your loan's repayment schedule or the overall costs in any way. However, it's good to know ahead of time whether you will be dealing directly with the bank or with another company, so review the loan details of each loan you're interested in before applying.
The APR is a number lenders use after factoring in many different details for a loan. Because it takes into account a borrower’s favorable circumstances (an excellent credit rating or the availability of a guarantor, for instance), the APR is often a slightly lower rate than the interest rate.
Because LeveLend can’t guarantee that every borrower will qualify for the lower APR rate, we use the interest rate to calculate the total cost and monthly payment of all loans within the website. This is the most honest and transparent way for us to display the potential costs associated with each loan.