Good news for South Carolina’s students: A non-profit loan provider has made it easier for students to acquire and pay for their loans. This is made possible by reducing the standards used as basis for the approval of student loans submitted. Other than that, the fixed interest rate is set at 6.75 percent instead of the usual 7.15 percent.
According to a representative of the lending firm in South Carolina, the adjustment took place following the rising costs of education in the state. The more accessible student loans ought to provide alternative education options at a lower rate. This would also increase the likelihood of on-time and full payment, which would be beneficial to the lender as well. If the program succeeds, lenders (both traditional and nontraditional) will become trusted partners with schools, parents and students.
More Adjustments For Better Lending Options
While student loan lenders from other states would require that the loan be paid back while the student is still in school, SC lenders are working on allowing the borrower to have repayment options. This means that the borrower can either pay the principal amount plus interest while enrolled or interest payments can be delayed. Instead, a minimum monthly payment can be paid in order to satisfy the lender’s need for steady payment.
As for creditworthy borrowers, they can be given an origination fee of as low as 1 percent. But bad credit loans are still available for borrowers that have bad credit or no credit history at all.
Further, the maximum amount for a student loan has been extended. Based on the newly set guidelines of the program, a borrower can borrow up to the cost of attendance. The total loanable amount should first be deducted by the amount of financial aid provided. These funds can then be used for educational expenses like room and board, books, transportation, school supplies and of course, tuition and fees.
Is This The Start Of Better Lending Solutions?
Recently, three student loan lenders have been criticized for a scheme which would extract more interest from borrowers. Based on the complaint submitted, the lenders were accused for keeping borrowers trapped in debt when borrowers already want to repay the money soon.
The basis of the complaint was that the three sued lenders disregarded the borrower’s instructions of how the monthly payment is to be applied to the borrower’s loans. Further, it was explained that the prepayments were not used to reduce the principal amount. Instead, the prepayment was applied to future installments but often does not reduce the principal loan. Hence, the loan guideline which states that the prepayment will not be used to satisfy future installments has been blatantly disregarded.
Also contained in the complaint is that the payments which were supposedly taken off directly from the given account were not done. As a result, the borrower has to pay more for penalties and charges. Apparently the convenience offered in automatic deductions is only a trap for more charges later on.
If the said complaint is to be analyzed, the dissatisfaction stems from the following:
• The terms are misleading because they do not directly inform borrowers on how their prepayments will be applied to the loan.
• The agreement on repayment has not been fully realized as there are lapses in the creditor’s part.
• There was a promised 1% reduction of the interest rate if the borrower can make 36 monthly payments consecutively and on time. Apparently, this part remains a promise.
This case in an example of why the newly suggested student loan program in South Carolina is very well anticipated by all borrowers affected. If the program continues and proves to be successful, you can expect replication in other states in the US.