3 Things To Know About Refinancing Your Student Loans

By Madison White on April 28, 2019

Unfortunately, many students don’t learn about the repercussions of student loan debt until well after they’ve taken out large sums of money. At the time, it just seems like free money! Once you’ve graduated, or even before, you may realize that the weight of a lot of student loans can be seriously debilitating to living your adult life.

When people take out many student loans, they may consider refinancing them to receive lower interest rates that may make them easier to pay off. When considering refinancing your student loans, there are a few key things to note before diving in.

1. Which loans are eligible?

Loans that you have undertaken as a student qualify as student loans. For some people, these will be student loans that they have taken from the federal government. For others, these could be private loans that they have taken out from other banks. You could have one of these options or both in regards to your loans. Almost all of these will qualify for refinancing.

Most people only consider refinancing when they have a large number of loans and loan interest to pay off. If you have a relatively small loan amount that you foresee paying off easily within the next few years, it may not be worth your time to refinance your loans.

 2. When should I consider refinancing?

Some people consider refinancing when they have a considerable amount of student debt. They may also consider this if they have multiple loans at different rates which refinancing would simply. You should also consider what your current loan interest rates are and what you could potentially refinance them for at different banks and companies.

If you have federal loans, it is worth it to consider that the interest rates are locked. This means that they cannot be raised during the time that they are being paid off. This is very important because some refinancing options may not come with interest lock, meaning that your rates could increase over a period of time. This could mean that you spend more money paying off your refinancing loan in the long run.

Many people consider refinancing when they know that they have high-interest rates on their student loans, have a good job, have emergency savings, and have good credit. You should have a fair amount of stability in your life before committing to a refinancing plan. Because this new loan will be based on your history with lending and payments, if you have a poor credit score, it is unlikely that you will get a better interest rate with a new refinancing loan.

When you refinance, it is also important to note other fail-safe options that you may be giving. Government-issued loans come with options for deferment, forbearance, and forgiveness options. There are also certain risks that come with loan discharge in case of death or permanent disability. Members of the military should also look into how refinancing could affect their student loan situation. Overall, your new refinancing loan will likely come with none of these benefits listed above. If you think that you may need to use some of these fall back options, you may want to reconsider refinancing your loans.

3. How do I find a good fit for me?

If you’ve decided that you want to refinance your loans, you should definitely start by researching your options. As stated before, there are many pros and cons to refinancing that depend largely on how much you owe, your interest rates, and your credit score. You will need to look into multiple different lenders before deciding which one is right for you and your situation.

There are many articles online that will list different refinancing loan providers and a little bit about them. This website, Uloop, also has a section on student loan refinancing providers. It is a helpful guide that gives important details about the restrictions and rates that accompany each provider.

Some key information to look for when considering refinancing options: interest rates, the maximum amount of loans they will cover, what the repayment plan looks like, and if their fees might increase. Some of these factors won’t be listed directly on their website so you may want to read some reviews and testimonials about the lender to see how their customers perceive their service. Remember to read reviews with the idea that some people will be nit-picky about things and others may have unclear ties to them. Regardless, reviews and reviewing websites can give helpful information about what to expect from certain companies.

While refinancing might not be for everybody, it can certainly be a huge help for certain people. If you feel like you fit many of the requirements for refinancing, this option could save you a lot of money and stress in the long run.

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