Loan Know-How

In evaluating the borrower rewards offered by numerous lenders, we found that some lenders’ advertised rewards were earned by only 10–20% of their borrowers. Reasons for this included qualifications that were difficult to achieve—such as a large number of consecutive on-time payments—or time-limited criteria—such as a requirement that borrowers sign up for auto-debit at the beginning of repayment. One lender cancelled rewards for too large a loan pre-payment. Others cancelled rewrads for permitted interruptions, like deferment of payment while in graduate school.

To help you understand in detail the options offered by various lenders, we’ve put together this checklist of questions to consider.

Will I definitely receive the promised rebate, fee reduction, or interest rate reduction? Or…

• Will I get the reward only if I make a certain number of on-time payments?
• Will I lose the reward if my payment is just 3 days late? 7 days late? 21 days late?
• Will I lose the reward if I have a permitted interruption in payments (called deferment or forbearance) for something such as graduate school or unemployment?
• Will I lose the reward if I make a large early payment on my loan?

Will I manage my loan repayment electronically? If so…

• Will my interest rate be reduced if I choose “auto-debit”—automatic repayment from my bank account?
• If an interest rate reduction is offered for using auto-debit, do I need to sign up at the beginning of repayment in order to qualify for the interest reduction?

How soon will I receive my borrower rewards?…

• Will the lender waive loan fees so that I receive the full amount of the loan up front?
• How many on-time payments do I have to make before receiving a reward like a rebate (a one-time reduction in loan amount) or interest rate reduction (which benefits me every year)?

Will the lender help me receive and retain my borrower rewards? For example…

• Will the lender alert me—in advance of the deadline—that I’m at risk of losing a reward if a late payment is not received within a certain timeframe?
• Will the lender offer me a way to earn back a reward lost through missing a payment deadline?
• If the lender bases rewards on the number of on-time payments made, will the lender allow for a “permitted” interruption (deferment or forbearance) without resetting the count to zero?

Other considerations…

• Is the lender a for-profit lender or a non-profit entity?
• What is the lender’s level of customer service? Will the lender contact me if there is a potential problem, or wait to hear from me?
• Can I easily contact the lender over the phone or online to get my loan information?
• Does the lender offer other financial services I’m interested in, such as free checking or financial literacy training?

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