As we head into the new academic year, many international students will be looking at international student loan options. Comparing loans is not easy, especially with bank terminology. One of the most important terms that will effect students is how much you are going to pay back over the course of your loan. Loans are repaid in two parts: principal and interest rates. See below for the principal and interest rate defined:
Principal is the total amount of money you were loaned. Let’s say you are planning to attend New York University and you took out a $30,000 loan to cover tuition, room and board, books, etc. This amount is what you have borrowed from the bank, and thus will be expected to pay back.
There is a cost to borrowing, and this is known as the interest rate. This is the amount that you pay back to the bank on top of what you initially borrowed (the principal). Lenders typically have a range for the amount of interest they charge, which will depend on you (and your co-signer’s) creditworthiness. Typically this is expressed on an annual basis known as the annual percentage rate (APR) which will be finalized after your loan application has been submitted and reviewed. There are two types of interest rates that will be disclosed before you apply for a loan:
Most student loans are fixed rate interest, however many private student loans do offer variable interst rate. It is important to read the terms and conditions to know how the principal and interest rate are defined, how it will be determined, and how it may change.