Borrower Benefits are a way that a lender offers you rewards for how well you handle the repayment of your loan. There are also some benefits that are given to you right up front as a way to market their loan products to you. There is a wide variety of ways that borrower benefits are offered and applied. You should check the details page of each loan offer to get all of the information about that particular loan offer’s benefits. Here is a list of the most common borrower benefits that are offered:
• An interest rate reduction applied to your loan for setting up your payments in an automated fashion from your bank account (ACH or auto-debit). The interest rate reduction is usually applied only while you are in repayment status and the automated set up is active.
• An interest rate reduction applied to your loan after a certain number of monthly payments have been made on time. The number of months of on-time payments vary by lender or loan product, and the amount of the interest rate reduction also varies by lender and loan product.
• An up front interest rate reduction applied to your loan immediately.
• A principal reduction applied to your loan immediately or upon obtaining a certain goal.
It’s important to understand the details of each type of borrower benefit. The rules for each type of benefit will vary with each lender. Here are some questions to consider when evaluating the various benefits included in each loan offer:
• How soon is the benefit applied?
• Under what conditions will the benefit remain, can this benefit be lost?
• If the benefit is lost, under what conditions can it be reinstated?
• How likely is it that this benefit will be earned and received?
• Can the benefit be lost even if the borrower meets all of the requirements?