Pay less on your student loans with Buddyinterest

BERKELEY, Calif. - June 6, 2014 - PRLog -- Mark Harris pays a 4 percent interest rate on the mortgage for his house in a New York suburb. His car loan is 1.5 percent. The federal education loans he took out to send his 2 sons to college? They’re all hovering at 8 percent and above. “Student loans are a big drain on my budget” he says. Mark, like most parents are worried and questions why the $100,000-plus he owes on the student loans is so high when compared to his other loans and today’s low rates.

Federal loans account for over 80% of the $ 1 Trillion student debt. The congress sets the rates over a decade ago and refinancing to a lower rate is not quite possible. Some lawmakers, private lenders and peer to peer lending companies are looking for ways to give borrowers more repayment and refinancing options. But this is also not a great option because what it does is; it just clubs all your loans together and charges you a weighted average interest rate on your outstanding. Private loans historically have been more expensive than federal ones. One solution that students and parents would want to consider is Buddyinterest, an innovative social credit platform for borrowers to access loans from their network at rates lower than federal rates.

For parents such as Mark, the rate on federal education loans is 8 percent; for students, the rate is 7 percent. Though rates have been coming down, they’ll never be as low as those on mortgages or car loans, which are tied to physical assets that lenders can repossess if a borrower defaults.

While borrowers, who have multiple loans can consolidate them, the rate on the new loan as mentioned earlier is just the weighted average of the existing loans. Now all your small, medium and big loans become one huge loan. This may not be a wise choice opines Johnson, Head Marketing at Buddyinterest, the world’s first social financial network, that helps borrowers discover loans at low interest rates within their own trusted network. He is also quick to add that “Borrowers with private loans can consolidate only in theory, but does not solve the problem of high interest rates and the loan does not disappear. Even your once small loan has become part of a bigger loan. The problem persists”. The average interest on loans in the American context is 6 percent.

Some of the repayment options such as forbearance(—allowing the borrower to stop making payments temporarily) and plans that offer gradual increase in payments over time and ones in which borrowers pay only interest in the first three or four years may be Debt(read Death) traps, points out Jacob, vice president -technology, Buddyinterest.

Mark is grateful to have been able to borrow to send his sons to school—“I will retire in two years, the federal loan rates are not going to come down anytime soon,  I don’t think loan consolidation is wise as the interest rates looks slightly smaller but the repayment tenure has increased. I will borrow money from my financial network at lower rates to pre-close these expensive loans”. With social credit he is confident of repaying his loans sooner and also have a comfortable retirement.