The student loan rate
When you are a student, you quickly run out of money. However, whether it is to finance housing, or to acquire a computer, advantageous solutions exist for the benefit of students via loans with attractive rates. Return on the student loan rate.
Definition of student loan
The student loan is a consumer credit whose purpose is to finance studies, in particular tuition fees. It is generally granted subject to age (under 28). Unaffected, it also allows you to participate in accommodation, food, travel or any other type of expenses because there is no need to justify your expenses.
Under certain conditions, the State can stand surety, that is to say provide a guarantee, in order to prevent a relative from doing so. The request is generally made to a bank which will analyze, in view of the file, whether it grants the credit. The loan may be subject to deferred repayment in the sense that the borrower does not begin repaying until the end of his studies.
From there, the amount and the interest rate of the loan vary depending on the bank. However, student offers remain advantageous because the student loan rate is relatively low.
Studying Offers - Or How To Get The Best Student Loan Rate?
Before choosing the most advantageous credit offer, and therefore finding the best student loan rate, you must compare the different offers according to the APR, that is to say the annual percentage rate. Sometimes simply called the overall effective rate (TEG), it corresponds to the real student loan interest rate set by the lender. It accounts for the total cost of the credit since it includes not only the base interest rate (ie the nominal rate) but also the ancillary costs. These fees can include registration fees, application fees, various commissions, or even an insurance premium when insurance is taken out directly with the lender.
Thus, it is necessary to ensure that a student loan rate of 1% corresponds well to the APR, and not only to the nominal rate, otherwise the risk of having various sums to pay. The 1978 Scrivener law imposes various obligations on financial institutions in order to better inform consumers. As such, it states that this APR must be effectively communicated.
Warning: The student loan rate should not be the only variable to be taken into account in the analysis of offers. Indeed, it happens that certain loans, which appear advantageous, do not offer sufficient quality. The APR only takes into account 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 its terms. It is not uncommon to obtain several significant advantages (eg free bank card fees).
Overview of student loan rates
As an indication, here is a small inventory of loans offered by five French banks on October 1, 2016: Crédit Lyonnais (LCL), Société Générale, BRED, BNP-Paribas, Caisse d'épargne.
The student loan rate - as an 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 is on average 2.08%; 1.71% for BRED and 0.91% for the Savings Bank. Please note, these values are liable to vary and are given for information only. Moreover, special promotions are regular. As such, BNP-Paribas offers a student loan rate of 0.90% until October 15, 2016.
It appears from this list that the student loan rate is rather advantageous among the main credit organizations - for comparison, a basic consumer loan has an average rate of around 4%.
But as we have seen, the comparison of student loan rates is not enough, which is why other criteria must also be taken.
- First, the amount awarded: The average minimum is € 1,500 but the maximum varies greatly between the different organizations. Generally, it goes up to 45,000 € but some banks offer a higher amount; in particular the Caisse d'Epargne, which offers a maximum sum of € 60,000 for a Parisian student, or BNP-Paribas, which offers a loan for a sum of up to € 75,000.
- Second, 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 according to the different organizations, in particular according to 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 grandes écoles are often partners of banks), the age or the affiliation with the bank for the main banking activities. However, as we have seen, the simple comparison of student loan rates is not enough and the different possibilities and flexibility of credit must be carefully studied.
Cases of zero student loan rates
Many organizations offer zero-rate credit offers reserved for students. This means that the borrower only repays the amount borrowed without interest. However, a zero-value student loan rate usually only allows you to advance small amounts.
As such, there are many offers in advance of the start of the school year. This type of loan allows you to obtain a sum, which can go up to € 1,000, to cover different types of expenses without proof. Generally, this type of advance is still useful for tuition fees, accommodation costs or equipment costs. It is free in the sense that the student loan rate is generally zero, without interest and without administrative fees. However, 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, in particular if he knows that he will have a financial contribution in the months following the start of the school year (for example if he has landed a student job). In addition, a deposit must often be provided and, since it is an advance, it rather takes the form of an overdraft.
In the same vein, another loan allows you to benefit from a zero student loan rate in the form of an advance for CROUS or State grants. It makes it possible to anticipate certain expenses before the payment of sums by the social body. Several banks offer it, including the Caisse d'Epargne or BNP Paribas, and can reach € 1,500. Be careful, however, the repayment period is once again generally short (on average 3 months) and care must be taken to be the holder of the right to the grant. Also, it happens that the student loan rate is not totally equal to 0, although it is generally very low.
Finally, many financial organizations offer license offers at one US dollar per day to finance driver's license training. Aimed at young people (generally 15-25 year olds), they are often used by students. The student loan rate is then zero since all the interest is covered by the State and there are no administrative fees. This type of credit has the advantage of having a low repayment amount since it amounts to the equivalent of 1 € per day spread over several monthly payments of 30 US dollars with a final adjustable monthly payment. Note that since July 1, 2016, this type of loan has been used to finance training for the car license (license B) but also for the motorcycle license (A, A1 and A2).
Thus, it appears that it is possible to benefit from a zero student loan rate in several cases: either in the form of an advance, or to finance your driving license. This is why it is important to clearly define your need before embarking on a loan and compare the different possibilities. For example, the free advance makes it possible to meet a one-off need, during the start of the school year to pay the registration fees at the university in particular, in a more advantageous way than a traditional student loan. However, if the financial need is too great, or if it is not certain that the repayments will be made quickly, the advance is not suitable - it does not matter if the student loan rate is zero. This is why reflection is important in this matter. To take out a loan is to commit to being able to repay it. You have to study the amount needed, the repayment capacities and then choose the most suitable offer. It is then, and only then, that the comparison of student loan rates is useful to obtain the most financially advantageous offer. Our online simulator, which also takes into account the terms of the credit, is here to help you in this task.