Student loans are among the most popular forms of debt.
That’s a problem.
Here’s what you need to know about them.
They’re easy to get ahold of Student loans aren’t cheap, even by Canadian standards.
If you’re under age 18, the average annual interest rate for a typical student loan is 8.8 per cent.
The interest rate will increase with income, education, and other factors, and can even climb as high as 12 per cent for borrowers in high-cost regions.
The government caps the amount that borrowers can borrow at $25,000 a year.
(For comparison, the median annual household income for a Canadian is $50,000.)
To qualify for a loan, you have to complete a three-step process.
You must show that you’re a full-time student, pay off your debt and take on a job that’s paying you a decent wage, pay down a large portion of your debt, and meet a certain amount of work-related debt.
The repayment rate on a student’s loan depends on their credit score, but it usually averages about 3.5 per cent per year.
The monthly payment on your student loan will vary depending on how much you earn, how long you work, and what kind of work you do.
For example, if you earn $40,000 annually, your monthly payment would be $25.50.
The payment can be reduced if you’re laid off or you’re transferred to a different job.
Once you’ve made the payment, you can apply for more loans.
If your loan is approved, you’ll get a personalized card with a secure, personal message from your student lender.
You can also apply online through a student lender’s website, but they may require a certain minimum amount of information to confirm you’re eligible.
You’ll also need to provide proof of your employment or income, such as a bank statement, pay stubs, or a paycheck.
You don’t have to pay any interest on your loan if you meet all the other requirements.
Interest rates vary by province and region, so you’ll want to check with your local government.
Students who take out student loans are required to pay back the loans in full, regardless of their repayment period.
There’s no grace period for the interest.
They can help pay for your education The government estimates that between 60 and 90 per cent of student loan borrowers repay their loans on time, and that more than a third will pay off their loans at some point in their lives.
That makes student loans especially valuable when you’re looking for a way to help pay your bills or make extra money to cover other expenses, such and medical costs.
Interest-free student loans allow borrowers to borrow up to $100,000 and pay it off within 10 years.
(These rates are different depending on your province and province of residence.)
These loans also give you the opportunity to save up to 70 per cent on your monthly mortgage payment.
You won’t need to repay any principal, but interest will accrue on all the debt.
Interest is charged on the first $250,000 of debt you owe, and if you default on the remaining debt you’ll pay interest on the balance over $300,000.
Interest isn’t charged on student loans for income-related reasons, such for students who have income-based repayment plans.
If it’s not enough to pay off the principal, you may have to make payments towards the balance in full each year.
They are often a good investment In the recent past, students were encouraged to apply for student loans as a way of earning more cash.
But many Canadians don’t believe that’s true anymore, and it’s possible that they’ve missed out on some of the best student loan opportunities available.
With so many student loan options, it’s important to make sure you’re getting the best value for your student loans.
In addition to paying off the interest, you could consider getting an annual fee loan from your bank, or an income-driven loan.
If interest rates are low, or the interest payments are low enough, you might consider using these options as a quick and easy way to pay down your debt.
With interest rates on student debt still at record lows, it may be worth considering these options.
In Canada, interest rates vary greatly depending on the lender, but most banks offer variable interest rates that can range from 0.15 per cent to 6.5 to 8 per cent a year, depending on what you owe.
If the interest rate is low, you won’t pay any principal.
If rates are high enough, some banks offer interest-only plans that offer a lower rate, but with interest on those loans remaining the same.
Student loans can be a good long-term investment.
If they are, you should pay them off early so you don’t miss out on any big financial gain. But