When you’re a student, you’re quickly short of money. Yet, whether to finance his housing or acquire a computer, advantageous solutions exist for the benefit of students via the loan with attractive rates. Back on the student loan rate.
Definition of the student loan
The student loan is a consumer loan that aims to finance studies, including tuition. It is generally granted on condition of age (under 28 years). Unaffected, it also allows to participate in housing, food, travel or any other type of expenses because there is no need to justify its expenses.
Under certain conditions, the State can act as guarantor, that is to say, provide a guarantee, in order to prevent a relative from doing so. The request is usually made to a bank that will analyze, in view of the file, whether it grants credit. The loan may be deferred in the sense that the borrower only begins repaying at the end of his studies.
From there, the amount and the interest rate of the credit vary according to the bank. However, student offers remain advantageous because the student loan rate is relatively low.
The study of offers – or how to get the best student loan rate?
Before choosing the most advantageous credit offer, and therefore find the best student loan rate, it is necessary to compare the different offers according to the APR, ie the annual percentage rate of charge. Sometimes referred to simply as the Global Effective Rate (APR), it is the real interest student loan rate set by the lender.
It reports the total cost of credit since it includes not only the basic interest rate (the nominal rate) but also the ancillary costs. These fees may include registration fees, processing fees, various commissions, or even an insurance premium when insurance is taken out directly with the lender.
Thus, it must be ensured that a student loan rate of 1% corresponds well to the APRC, and not only to the nominal rate, at the risk otherwise of having various amounts to pay. The Scrivener Act of 1978 imposes various obligations on financial institutions to better inform consumers. In this respect, it states that this APR must be effectively communicated.
Attention: The student loan rate should not be the only variable to be taken into account in the analysis of the offers. Indeed, it happens that some loans, of advantageous appearance, do not offer a sufficient quality. The APR takes into account only the financial aspect of the loan and not the repayment terms, namely the duration, the possibilities of modification with or without costs.
It is therefore also necessary to take into account the flexibility of the offer and not only its rate. Do not hesitate, in this case, to obtain special preferential conditions to negotiate your student loan rate and terms. It is not uncommon to obtain several significant advantages (for example free credit card fees).
Student loan rate overview
As an indication, here is a small census of the credits proposed by five French banks as of October 1, 2016: Crédit Lyonnais (LCL), Societe Generale, BRED, BNP Paribas, Caisse d’Epargne.
The student loan rate – as APR – varies on average between 0.80 and 3.56%. More precisely, it is between 0.80% and 2% at Crédit Lyonnais, this bank taking into account the chosen course. At Société Générale, it averages 2.08%; 1.71% BRED and 0.91% savings bank. Attention, these values are likely to vary and are given only as an indication. Especially, special promotions are regular. As such, BNP-Paribas is offering a student loan rate of 0.90% until October 15, 2016.
This list shows that the student loan rate is rather advantageous for the main credit agencies – for comparison, a basic consumer loan has an average rate around 4%.
But as we have seen, the comparison of student loan rates is not enough, which is why we must also take other criteria.
- Firstly, the amount granted: The average minimum is 1500 € but the maximum varies greatly between the different organizations. Generally, it rises up to € 45,000 but some banks offer a higher amount; Caisse d’Epargne, which offers a maximum of € 60,000 for a Parisian student, or BNP-Paribas, which offers a loan for up to € 75,000.
- Secondly, the total possible repayment period: It is generally between 9 and 10 years.
- Finally, the criteria for refinement: If the application fees are generally offered, the cost of insurance varies greatly depending on the different organizations, particularly depending on the age and the situation of the student borrower.
Consequently, in the current market, the student loan rate remains below the average of the rates charged for other consumer loans. It varies according to the banks but also the personal situation of the borrower, for example the chosen course (the big schools being often partners of banks), the age or the affiliation with the bank for the main banking activities. Still, as we have seen, the simple comparison of student loan rates is not enough and we must carefully study the various possibilities and flexibility of credit.
Cases of zero student loan rates
Many organizations offer zero-rate credit offers for students. This means that the borrower only reimburses the borrowed money without interest. Nevertheless, a student loan rate of zero value generally only allows small amounts to be advanced.
As such, there are many offers in advance of return. This type of loan makes it possible to obtain a sum, up to 1000 €, to cover different types of expenses without justification.
Generally, this type of advance is useful for tuition fees, installation costs in housing or equipment costs. It is free in the sense that the student loan rate is generally zero, interest-free and without any fees. Nevertheless, it must be repaid within 3 months, sometimes over a slightly longer period.
This offer is only useful if the student knows that he will be able to repay quickly, especially if he knows that he will have a financial contribution in the months following the return to school (for example, if he has landed a student job). In addition, a deposit must often be made and, since it is an advance, it takes the form of an overdraft account.
In the same spirit, another credit allows to benefit from a zero student loan rate in the form of an advance scholarship CROUS or the State. It makes it possible to anticipate certain expenses before the sums are paid by the social organization. Several banks offer it, including the Caisse d’Epargne or BNP Paribas, and can reach 1500 €. Be careful, however, the repayment period is again generally short (on average 3 months) and must be sure to hold the right to the stock market. Also, it happens that the student loan rate is not totally equal to 0, although it usually remains very low.
Finally, many financial organizations offer one-euro permit offers per day to finance driving license training. Aimed at young people (usually 15-25 years old), they are often used by students. The student loan rate is then zero since the totality of the interests are taken in charge by the State and that there is no expenses of file. This type of credit has the advantage of having a small amount of reimbursement since it amounts to the equivalent of 1 € per day spread over several monthly payments of 30 euros with a final adjustable monthly payment. Note that since July 1, 2016, this type of loan is used to finance training for the car license (B license) but also the motorcycle license (A, A1 and A2).
Thus, it appears that it is possible to benefit from a student loan rate in several cases: either in advance or to finance his driver’s license. This is why it is important to define your need before embarking on a credit and comparing the different possibilities. For example, the free advance can meet a specific need, at the beginning of the school year to pay the university registration fees in particular, more advantageously than a traditional student loan. Nevertheless, if the financial need is too great, or if it is not certain that repayments can be made quickly, the advance is not appropriate – no matter if the student loan rate is nil.
This is why reflection is important in this area. To subscribe a credit is to undertake to be able to refund it. It is necessary to study the necessary amount, the capacities of refunding then to choose the most adapted offer. It is then, and only then, that the comparison of the student loan rates is useful to obtain the most financially advantageous offer. Our online simulator, which also takes credit terms into account, is there to help you in this task. top