Refinance Your Student Loans and Save Big on Interest Payments
Apr 27, 2022
Student loans are a HUGE burden on most college students and graduates. The average student loan debt is roughly between $37,113 and $40,904, which makes it difficult for many to get their lives started. This type of debt has continued to grow over the years, and it has now become the second most common form of consumer debt in America. In some cases, this can lead to people falling behind on payments, which then leads them to default on their loans.
In order to avoid this, people are encouraged to make payments on their loans, but how can you when you lack the funds? Some people are informed by lenders to take "pay-as-you-earn" agreements, which establish a repayment length of 20 years.
This might not be the right solution for everyone as anything can happen in that time span, like changes in income, marital status, familial status, etc. Fortunately, people have another option available to them to deal with their debt.
The good news is that there are many lenders out there willing to refinance student loans. A number of popular companies like Credible, Penfed, and SoFi offer these services.
However, not all lenders may be able to refinance your loan. Here are a few questions you can ask yourself before considering refinancing so that you can be sure you're getting the best service.
- What kind of reputation does this company have with customers?
- Has this company been accredited as a legitimate business?
- Is there a phone number I can call directly to talk to someone about my loan situation?
Benefits of Refinancing Student Loans
The burden of student debt weighs heavy on many people. They can be very difficult to pay off because of the high-interest rates and the long repayment period. Refinancing student loans is a solution to this problem.
It allows borrowers to get more competitive interest rates, better repayment options, and lower monthly payments. For instance, refinancing your 9% interest rate to 5% on a $150,000 loan could save $37,099 interest on a 10-year loan!
Some examples include the following:
- Private Loan Refinance: Available to both federal and private borrowers, one or multiple loans will be replaced with one single private loan with fixed or variable interest rates.
- Loan consolidation: This option allows you to combine all of your federal loans into one. The repayment period can be extended from the standard 10-years up to 12 to 30 years.
As you can see, there are many benefits to refinancing that make it worth it in the long run.
How To Find The Best Refinance Plan For You
There are a few key things to consider when deciding what the best plan is for your situation. The first thing to consider is the length of time you plan on staying in school. If you are planning on staying in school for less than five years, refinancing your student loans may not be worth it. The second thing to consider is whether or not you have a good credit score.
If you have a good credit score, then refinancing your loans will be more beneficial for you, as lenders will see that as an indicator that you will be able to make payments on time.
Therefore they are more likely to offer lower rates and better terms than if they had seen poor or no credit history at all. The third thing to consider is how much money you currently owe in student loan debt.
Tips for Refinancing Student Loans & Steps to Take
Student loans are a hefty financial load. So it is important to know the best way to refinance them.
- Find out what your current interest rate is and what kind of rates you qualify for.
- Compare the rates and see which one will save you more money over time.
- Get your credit score from one of the three credit bureaus (Experian, Equifax, TransUnion) and make sure it is at least above 650 before refinancing your loan with your lender or a new lender you are considering refinancing with.
- This will affect how much money they will offer you as well as how much interest they will charge on your loan if they approve your application.
- Make sure that you have kept up with your expenses on time without any past due balances. Missing too many payments can cause you not to be accepted for a loan. Once you've made sure that you're in good standing with your credit, go ahead and apply to a lender for refinancing.
- You will be able to see what your monthly payments would be on the loan that you apply for if it is approved.
Looking ahead
The student loan crisis is not going away anytime soon. This is why it's essential to know where you can get the best deals when refinancing what they owe.
Refinancing student loans can be a great way to get out of debt. It is an option that many people overlook, and it can often be the best decision for them.
It is a good choice for those who are not sure if they will have a stable income in the future or those who have already graduated from school and don't need to borrow more money.
Source: This information comes to us courtesy of Money.com
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