Should I Refinance My Student Loans?

June 19, 20220
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Should I Refinance My Student Loans?

Introduction

If you’re one of the 45 million Americans with student loan debt, you might want to think about refinancing your loans. Refinancing means replacing your existing loan with a new one that has a lower interest rate and better terms. If you’re able to refinance at a lower interest rate, you could save money on your student loans or even pay them off faster.

You’re not alone if you have student loans and are wondering how to pay them off. Americans owe more than $1.5 trillion in student loan debt, which is split up between about 45 million Americans.

As a student loan borrower, you’re not alone. Americans owe more than $1.5 trillion in student loan debt, which is split up between about 45 million Americans. Student loans are a serious problem for many people, but it’s also something that can be fixed—and we’re here to help you do just that.

The average student loan debt is about $37,000 per borrower (for graduates who took out loans), according to research from LendingTree® Consumer Finance. However, there can be significant variation from person to person depending on their major and how much they’ve borrowed over time.

Refinancing your student loans at a lower interest rate through a private lender could save you money, lower your monthly payment, or both. For example, if you have a 6% interest rate on your $50,000 in student loan debt and you refinance to 5%, you’ll save $1,100 over the life of the loan.

Refinancing your student loans at a lower interest rate through a private lender could save you money, lower your monthly payment, or both. For example, if you have a 6% interest rate on your $50,000 in student loan debt and you refinance to 5%, you’ll save $1,100 over the life of the loan.

If your goal is saving money, consider refinancing when:

  • You plan to pay off the balance in 5 years or less (because paying it off faster will reduce the total amount paid).
  • Your payments are high compared with what they could be with a lower interest rate (meaning each month’s payment wouldn’t drop significantly).

Before you refinance your student loans, make sure your credit score is good enough to qualify for the best rates. If you’re still paying down other debts like credit cards, work on paying those balances down before applying. You may also want to check with one of the new education loan companies to see what rates they’re offering for refinancing.

Before you refinance your student loans, make sure your credit score is good enough to qualify for the best rates. If you’re still paying down other debts like credit cards, work on paying those balances down before applying. You may also want to check with one of the new education loan companies to see what rates they’re offering for refinancing.

The application process usually takes 15 minutes or less and can be filled out online or over the phone. Some lenders will even let you start the process immediately if they have an existing business relationship with you (such as through a checking account), which means they already have much of the information they need on file and don’t need further verification before approving an offer. If approved, your lender will pay off all outstanding debts — including federal student loans — and send you a check within 30 days!

Once you’ve found the right refinance company and terms for your situation, the application process usually takes about 15 minutes online. If you’re approved and choose to refinance your debt, your new lender will pay off your old student loans and send you a check for the difference between what is paid and the amount of your new loan (plus any origination fees).

Once you’ve found the right refinance company and terms for your situation, the application process usually takes about 15 minutes online. If you’re approved and choose to refinance your debt, your new lender will pay off your old student loans and send you a check for the difference between what it paid and the amount of your new loan (plus any origination fees). Refinancing can be a great way to save money on interest payments or consolidate multiple loans into one payment at a lower rate.

Should you refinance? What to consider first

If your credit score is good enough to qualify for a low-interest rate, then refinancing may be worth your while. Refinancing is not a one-size-fits-all solution to student loan debt. It’s important to consider the pros and cons of refinancing before making a decision.

  • If you can save money by lowering your monthly payment: This is one of the main reasons people refinance their student loans, especially if they are in repayment mode and have high monthly payments on top of other bills, like car payments and rent or mortgage payments. If this describes you, then refinancing may help lower your overall expenses and make it easier for you to pay off other debts such as credit cards or medical bills first before paying down the balance on student loans (if possible).
  • If your credit score is good enough: In order to qualify for the lowest rates from third-party lenders or private banks who offer student loan consolidation options there needs to be sufficient income available after paying down all existing debts including other types of loans (like car loans) which could end up costing more than expected depending upon how much they currently owe each month plus any additional fees associated with maintaining these accounts every month until they’re fully paid off at which point it would be too late!

What is student loan refinancing?

Refinancing is when you take out a new loan to pay off an existing one. You might think that refinancing your student loans would be the same as consolidating them, but generally speaking, they’re different processes. Consolidation involves taking out just one new loan to pay off all your other ones at once and then paying this single loan back over time—it does not change the monthly payments or interest rate on those loans. Refinancing, on the other hand, doesn’t give you extra money; it just changes how many loans are in play and how much each one costs for a given month’s payment amount and term length (more on that below).

  • Refinance federal loans: If you want to refinance federal student loans into one private loan with a better rate than what you’ve got now, check out LendingTree’s Student Loan Marketplace service (which will connect you with lenders without affecting your credit score). You can use this tool even if you have no financial assets yet or aren’t earning enough money yet because they’ll take into account what kind of income stream is expected in your future earnings potential when making their decision about whether or not they’ll approve your application.* Refinance private student loans: If instead of looking for lower rates on existing debt (like most people do), what if instead, we looked at ways that could reduce our overall debt load? That’s what refinancing is all about! Private lenders are willing to help us pay down our principal faster than standard repayment plans allow while also offering lower interest rates than those offered by government agencies such as Sallie Mae.* Refinance Federal PLUS Loans: For parents who wish their sons/daughters to pursue higher education but don’t wish them to incur huge debts by doing so this option enables them to ensure affordability*/end

How to determine your refinancing eligibility

In order to refinance your student loans, you must meet the following requirements:

  • Be a U.S. citizen or permanent resident
  • Have a credit score of at least 620 (the higher your score, the better)
  • Be employed and have a steady income that allows you to make monthly payments on time (if you are unemployed, it may be difficult to get approved)

How to find the best student loan refinancing company for you

  • Look for companies that offer the lowest rates.
  • Look for companies that offer the best customer service.
  • Look for companies that are accredited by the Better Business Bureau (BBB), which will give you peace of mind knowing they’ve been through an audit and found to be trustworthy and reliable.
  • Look for flexible repayment options, since loans don’t always align with your schedule. An option could be a temporary pause on payments while you’re unemployed or going back to school, or an extended grace period after graduation if needed. Ask about these features before you sign up with a company so you’ll know what’s available to use if needed down the road!
  • Consider student loan consolidation: Refinancing one loan into another can lower your monthly payment amount significantly over time—but remember that even though this may seem like an attractive option initially, there are lots of fees involved when doing so (like closing costs). Be sure this is something worth looking into before deciding whether or not it’s right for YOUR financial situation!

How to prepare for refinancing

To decide whether refinancing is right for you, there are a few questions to ask yourself.

  • How is my credit score? If your credit score is less than 700, it might be difficult to refinance your loans. Your lender may require that you have a good or excellent rating before they will consider refinancing your student loans with them.
  • What are my monthly payments on my current loan? After getting a copy of your credit report and score, the next step is to calculate how much money you can put toward other bills like rent or mortgage payments if you were able to lower the monthly payment on student loans. It’s not impossible for borrowers with poor scores to refinance at all—but it could make things more difficult than they need to be if there isn’t enough room in their budget for other expenses besides student loan payments each month (like car insurance).
  • Will I spend more money on fees? Many lenders charge origination fees upfront when they issue new loans; some charge annual maintenance fees as well. These fees can add up quickly over time, so it’s important that any borrower who considers refinancing has an accurate estimate of how much money these additional costs might add up to over the life span of their loan balance (or shorter term for those willing t

Choosing your refinancing terms

When you’re assessing your refinancing options, here are some things to keep in mind:

  • How long do you plan to keep the loan? If it’s for a few years and then you intend to pay it off, longer-term loans can be more expensive, but they come with lower monthly payments. Short-term loans, on the other hand, may have higher rates but require smaller monthly payments.
  • What kind of interest rate do you want? Refinancing student loans can save money by reducing interest rates—but only if they go down by enough that it outweighs the fees charged by private lenders. While federal loans tend to be more affordable overall than private ones because of their low-interest rates and flexible repayment plans (more on that later), there are still plenty of ways for students with excellent credit scores or large amounts of cash available immediately after graduating college to secure lower rates through private lenders than what they’d get from government-backed loans alone.
  • How much can you afford each month? One factor affecting which type of new lender offers better terms is how much you plan on paying back each month versus how much your previous lender had required—or even whether your old debt carries any late fees or penalties for nonpayment (which could make refinancing worthwhile). You’ll also need enough cash left over after food expenses each month so that paying off these debts doesn’t cause financial stress in other areas such as rent or utilities; otherwise, this could end up costing more money down the road when added charges pile up across several months’ worth of missed payments due entirely because there wasn’t enough money left over at nightfall every evening after covering all necessary living expenses like food tickets first!

Deciding to refinance your student loans

If you have student loans, it’s important to understand how refinancing can help you. But before you decide to refinance your student loans, ask yourself if it’s worth the risk.

If you are able to pay off your student loans in full, then refinancing is probably not for you. Because of the fact that student loan interest rates are typically lower than credit card debt and mortgages, refinancing could actually cost more than paying off the debt as quickly as possible. If this is the case for you, make an effort to pay down your debt as fast as possible instead of choosing to refinance.

If there is any chance that refinancing might save or earn money (for example: if the rate would be significantly lower), then proceed with caution! Be sure that each lender has been thoroughly vetted and compared so that no hidden fees or charges crop up later on down the road when they’re least expected – otherwise known as “gotchas.”

Conclusion

To recap, student loan refinancing might be the right move for you if you’re looking to lower your monthly payment or stretch out the term of your loans. However, what many don’t realize is that it can also be a smart money-saving move if you have good credit and a high enough income to qualify for a lower interest rate. If you do decide to refinance, make sure to carefully compare your options before signing on with a lender.

 

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