3 Benefits of a Fixed-rate Loan for International Students
As an international student preparing for study abroad in the U.S. or another country, you may have to get a loan to fund your college education. When shopping for student loans, you’ll have the option to choose a variable- or fixed-rate loan.
Although variable rates have advantages, a fixed interest rate offers more financial security. Here are a few key reasons to want a loan at a fixed rate.
3 benefits of a fixed-rate student loan
1. Your interest rate never changes
One of the main benefits of a fixed-rate loan is that the interest rate doesn’t change at all. The total amount you’ll pay toward your student loan is clear from day one. Your unpaid balance is also always charged at the same interest rate while repaying your loan. Even if economic conditions change, the rate on your loan remains the same.
2. Monthly payment amount stays the same
Since fixed rates are static, you can also expect a fixed monthly payment. Having the same payment amount is convenient when budgeting your money.
As a fixed-rate loan borrower, you don’t have to worry about your student loan payment increasing unexpectedly like you would, with a variable-rate loan. Having a predictable payment amount makes it easier to budget for other necessities that experience price swings, like gas or groceries.
3. Lock in an interest rate when market interest rates are rising
Locking in a fixed-rate student loan when the interest rate environment is low means you’ll limit the amount you pay in interest over the course of the loan.
A lot can happen in an economy over a repayment period of five, seven or 10 years. If market rates increase over a long period, you’ll have peace of mind knowing you’re reducing the cost of your overall education debt.
When it makes sense to choose a fixed-rate loan
Certain scenarios and personal preferences can make a fixed-rate student loan for study abroad a wise option:
- If you need a long repayment term. The longer your loan term, the higher the risk of market rates shifting. A fixed rate in this situation keeps your rate consistent despite uncertain economic conditions.
- If you don’t like taking risks outside of your control. Fixed-rate loans have zero risk of sudden and unexpected interest rate fluctuations. If regular changes in your financial budget make you uneasy, a fixed interest rate is ideal.
Is a fixed-rate international student loan right for you?
To truly gauge whether the advantages of fixed-rate loans are worth it for you, examine your financial stability. Then, ask yourself how comfortable you are with potential changes to your monthly loan payment and budget.
If you don’t like surprises when it comes to your student loans, consider a fixed-rate international student loan.
FAQs about fixed-rate loans
What are the advantages of a fixed-rate loan for international students?
Student loans with fixed interest rates make borrowing costs and monthly payments predictable for borrowers. It’s a safe option for those who worry about rising market rates and who prefer a predictable budget.
How does a fixed-rate student loan work?
When taking a fixed-rate student loan for study abroad, the interest rate remains the same for the life of the loan. Regardless of economic conditions, or the lender’s general rate changes, your loan’s rate will never change. As a result, your monthly payment stays the same for the whole term.
Can I pay a fixed-rate loan early?
For some U.S. lenders, you can pay a fixed-rate loan early without issues. However, the rules might vary for loans borrowed from non-U.S. lenders. Always check your student loan agreement to confirm whether your lender charges prepayment penalties before proceeding.
