Should You Refinance Your Student Loans?
Paying back student loan debt can be a daunting task, but refinancing your loan is one way to make it a little easier on yourself. Refinancing is not always the best decision for everyone, so be sure to do your own research before deciding to go this route. Use this guide to figure out if student loan refinancing is right for you.
Why am I refinancing?
There any many different reasons for you to want to refinance your student loans.
If you have both federal and private loans, refinancing is a way for you to consolidate your loans into one account. This way, you are no longer making multiple payments per month. If you only have federal loans and choose to refinance, you should be aware that you give up federal loan protections, such as deferment and federal loan forgiveness programs.
Another reason many people refinance is to get lower interest rates. Depending on the terms your new lender offers you, you will probably be able to get a lower interest rate than your original loan, thus saving you money in the long run.
How do I choose a new lender?
Each lender has its strengths and weaknesses, so it is always smart to shop around to find the best one for you.
There are many options available for you to use, such as well known banks and credit unions, or startups and other types of companies with a bigger focus on customer service. One advantage for using a large bank is that if you already do your banking with them, you will be able to manage all of your finances in one place.
Smaller companies who focus solely on student loan refinancing are another option that appeals to many people. Lendkey, for example, actually compares student loan refinancing offers from over 300 banks and credit unions in order to find you the best one.
How do I get the best rate?
Regardless of what lender you end up choosing, the new interest rate you get will largely be based on just a few things.
Your credit score factors heavily into it. Also, if you choose a shorter term, you will get a lower rate. You also have the option of choosing between a fixed rate or variable rate loan. Fixed rate is how it sounds, where your rate will stay the same throughout the loan. Variable rates start out lower, but can increase while you are still paying off the loan, and you can’t do anything to stop it.
Overall, refinancing your student loans can be make paying them off a bit easier, and is something we recommend everyone to look into.
