What are all of these disclosures that come with my Loan Agreement?
- Adequate explanations, which explains who will benefit from our loan product and the more strict terms of our loan agreement.
- Pre-contractual information disclosure, which is a summary of the most important commercial and legal terms of the loan agreement.
If you are applying from the US or going to study in the US, you will also receive the pre-contractual disclosure documents required by US federal law (under the Truth and Lending Act, regulation Z).
How is my interest rate determined?
Different loans and lenders use different methods to determine the interest due. Broadly speaking, there are two types of interest:
- Fixed interest - this is a flat rate. The interest rate you pay won’t change over time; if it’s 10%, it’s always 10% until you’ve repaid your loan in full.
- Variable interest - this interest changes over time, taking into account various market factors.
What impacts the interest rate on my loan?
Interest rates are typically determined on a few main factors.
- The first is a government's financial arm, which sets the federal borrowing rate. That affects short-term and variable interest rates.
- The second factor is investor demand for government notes and bonds. That affects long-term and fixed interest rates.
- The third factor is often the banking industry within the country as it offers loans and mortgages and can change interest rates depending on business needs.
Interest rates control the flow of money in the economy. Sometimes, monetary policies lower federal or national borrowing rates by a few percentage points to encourage borrowing and stimulate the economy. However, sometimes monetary policies raise rates to stem inflation and cool a hot economy.
Changes in rates will affect student loan interest rates and ultimately the cost of borrowing. Variable interest rates will fluctuate and change based on national trends. Fixed interest rates for new loans will reflect current trends and will be locked into the life of the loan.
What is the difference between a fixed and variable interest rate loan?
Interest is the cost you’re charged for borrowing money. When you pay back a loan, you pay it back with interest, so you end up paying back more than you borrowed. Your interest could be calculated on a fixed or a variable rate basis. Fixed interest rates stay the same for the life of the loan.
This provides predictable monthly payments with an interest rate that doesn’t change over time. However, your total student loan cost may be higher because the interest rate may be higher than the starting variable interest rate. Variable interest rates may go up or down due to an increase or decrease to the loan's index.
This means that your interest rate may be less than a fixed interest rate, resulting in a lower total student loan cost. However, your interest rate can rise or fall as the market index changes, so your student loan payments may vary over time.
Why is my interest rate on my loan agreement different from what I may have seen earlier in the process?
Prodigy Finance offers loans with variable simple interest rates which track a fluctuating benchmark rate. The interest rate includes a fixed margin tailored to your application and the benchmark rate that may vary from the time of your original provisional offer and your loan agreement.
We use the 3-month CME Term SOFR . This means that the total monthly interest rate will update every 3 months and so you may see a difference in the base rate that is quoted at the time of your original provisional offer versus your final loan agreement.
The variable base rate is updated on 8 Jan, 8 April, 8 July, and 8 October every year for the life of your loan. The base rates may be higher or lower than the previous quarter depending on the global interest rates. You will see this reflected on your monthly statements and you can always check out the current base rates here.
How will I know when my funds arrive at the school?
Prodigy Finance has a close relationship with your school, so they’ll let us know when to send your funds over and how much to send to cover each payment. We’ll hold onto your funds until then so that you aren’t accruing any extra unnecessary interest. It will usually take 3 to 5 business days for the funds to reach the school once we’ve released them. You'll get an email from us confirming once we have sent the funds to your school.
You’ll also need to allow your school’s admin department a few extra days so they can receive your funds from Prodigy and allocate the payment towards your personal student account. If It’s been more than 10 business days and the funds are still not reflected in your student account, this would be unusual so please do reach out to us so we can investigate things for you.
We hope that you now have a better understanding of the next steps in your student loan process.
For any additional questions, please contact us at email@example.com.