what's the difference between unsubsidized and subsidized loans?

Question

i'm trying to get a loan. but i don't know the differences between unsubsidized and subsidized loans.

Answer 1

When someone loans you money they basically rent that money to you. The rent you pay on borrowed money is called interest. A subsidized loan means that someone is paying some of your rent for you. In the case of student loans, it is the government paying. By doing this it lowers the cost of the loans, which makes it possible for more people to afford them and, consequently, for more people to be able to afford a higher education. The government subsidy comes in the form of paying the interest on the loan while you are in school, so you don't have to, in paying some percentage of the interest indefinately so that you can pay a lower rate when you DO start paying, and also by "gauranteeing" the loan. The government gaurantee means that if you default on the loan, the government will pay it back to the lender. Because the lender has very little risk, that allows them to charge still lower interest rates.

The bottom line is that a subsidized loan is a much cheaper source of money to you than an unsubsidized loan and if you can get one, you definately should.

Answer 2

One difference between the two is when the interest begins to accrue. $3000 Subsidized: You will not be charged interest before repaying the loan because the federal government (taxpayers) subsidizes the interest during this time. $2000 Unsubsidized: You will be charged interest from the time the money is first disbursed until it is paid in full. The interest is capitalized, i.e., you pay interest on any interest that has already accrued. A way to minimize the amount of interest is to pay the interest as it accumulates.

Answer 3

subsidized means the government promises the lender they will pay it back if you don't.

unsubsudized means you have to qualify for the loan on your own.

sounds like you are talking about student loans, because they are one main kind of subsidized loan. usually you have to be poorer (have more financial need) to qualify for subsidized loans - the government helps poor people with financial aid more.

subsidized is usually a better deal if you can get it. lower interest rates etc.

Answer 4

Subsidized loans is when the government such as FHA guarantees the loan. Unsubsidized is when your credit is used to make a decision if you get the loan or not.

Answer 5

subsideized loans are loans which accrue interest as soon as you get it. usually student loans are un-subsidised meaning hta tinterest doesn't accrue until a specific time, usually after they graduate.