Should I Refinance Student Loans?

No!

If you have student loans, do not refinance them anytime soon. You should pay these off as fast as possible. There’s no need to get any additional debt just to eliminate some debt that you’ve already got. If you don’t want to take advantage of interest rate cuts offered by lenders right now, then you really shouldn’t be refinancing.

Yes!

Refinancing your student loan at a lower rate may make sense if you plan to make payments over time instead of immediately paying them off. Also, if you’re planning to put extra money back into your plan or use some of it to pay down other debts, then refinancing your loans may help you keep that money rolling in.

Maybe?

It may make sense to refinance if you’re trying to buy a house. Many people choose to borrow less cash than they actually need in order to qualify for a mortgage. If you intend to use your newly-refunded loan to buy a home, then it wouldn’t hurt to look into refinancing. However, it might not be worth the hassle if you plan on using the refund to pay off existing debt instead.

Yes!

It may make even more sense to refinance your student loans if you have a high credit score. Your lender will probably give you a higher-than-normal interest rate if your credit score isn’t great. So, refinancing could be a good way to improve your credit rating and get a lower interest rate on your student loans.

Absolutely!

You absolutely should refinance your student loans. There’s never been a better time to do it. Interest rates are at their lowest point ever right now. And, the amount of money you’ll save each month by eliminating your other debts can easily cover the fees associated with refinancing your loans. Plus, if you decide to use a portion of the refund to pay off other debts, then you’ll be able to pay a little bit more toward those bills while still saving money on your student loans.

Should I Refinance Student Loans?

How much student loan debt do you have?

Student loans were meant to help students finance their higher education expenses, but now the average college graduate owes around $29,400 in student loan debt—and that doesn’t even count private educational loans. Many people try to pay off their student loans early, but according to the U.S. Department of Education, only 19 percent are able to do so without incurring extra fees.

Would refinancing your student loans make sense?

Refinancing your student loans would likely save you money over time. However, refinancing may not necessarily lower your monthly payment amount. You’ll need to take into account how many years you plan to keep paying back your student loans, what interest rate you’re currently at, and whether you’d get any tax breaks or additional cash-back benefits if you did refinance your loans.

What are some things to consider?

You’ll want to check out your school’s federal repayment program to determine if refinancing makes sense for you. If you decide to go through your lender first, be sure to know exactly how long you plan to continue repaying your loans. Also, determine whether refinancing would affect your credit score, since it could potentially raise your FICO score.

Will refinancing my student loans hurt my credit?

If you don’t end up making payments for the full length of your loan term, your credit rating will suffer. That said, refinancing your student loans won’t necessarily harm your credit history if you follow these steps:

Paying off your outstanding balances on time each month.

Not using your credit card excessively.

Regularly monitoring your credit score.

Do I qualify for refinancing?

Generally speaking, you should be eligible to refinance if your annual income is less than $65,000 and you’ve had no late payments on your federal Stafford Loan or PLUS Loan. In addition, you’ll need to meet certain requirements listed on the U.S. Dept. of Education’s website.

What happens if I default on my student loans?

Should I Refinance Student Loans?

What does refinancing do?

Refinancing means taking out a new loan at a lower interest rate. There are many reasons why someone would refinance student loans including getting a lower interest rate, increasing their monthly payment amount, reducing the total amount owed, lowering their credit score due to extra debt, eliminating payments altogether, and even using cash-out options instead of a consolidation. Some people might have a good reason for refinancing while others have no valid reason at all. If you don’t plan on paying back your original loan, then refinancing isn’t something you should consider. You need to first make sure you’re financially stable enough to handle the additional debt before considering a loan modification.

Why would you want to refinance student loans?

If you’ve been making consistent student loan payments for years without any problems, then you likely won’t need to refinance. But if you’re having trouble keeping up with payments, refinancing could help you get back on track. As long as you’re not behind on principal and interest (and you were never late), a loan modification could give you more flexibility to pay off your debts faster. A loan modification is basically a negotiated change to your original terms; they aren’t guaranteed to reduce your interest rate or increase your monthly payments. Instead, they often just allow you to pay less over time.

How much money would refinancing save me?

The average student loan borrower pays between $150-$300 per month, depending on how old your loan(s) are and what type of repayment program you currently use. So if you had a federal loan you’d pay about $900 per year ($150/month times 12 months). On the high end of the scale a person who’s current balance is around $30k would only pay $450 per year in interest. Most private student loans are subject to higher rates than the federal ones. Depending on your lender, you may pay anywhere from 10%-20% APR on these types of loans. That’s right – if you put $30,000 in a savings account earning 1%, you’d get about $3,000 after two years. Your interest rate on a loan of $30,000 would be $9,000 meaning you’d pay $27,000 in interest over the course of 360 months. If you refinance a loan at a lower percentage, you’ll pay less in interest, which means you’ll save thousands of dollars.

Is my credit worth anything?

Your credit score doesn’t matter unless you apply for big ticket items, like a house or car. But for personal loans, it can help determine your rates. While your credit score can improve or decline based on recent activities, your credit report will always remain intact. Even if you have bad credit, you can still qualify for some low interest loans. Before applying for a loan, check your credit report to ensure it’s accurate. Many lenders require proof of identity and address.

Can I really afford this?

If you follow the above steps, you shouldn’t find yourself in a financial situation where refinancing makes sense. In fact, you might actually lose money if you refinance. If your initial loan was at 8% and now you’re refinancing at 4%, you’ll pay more in interest in the long run. If you’re struggling to keep up with your payments, it may be best to try and negotiate a loan modification instead.

Should You finance?

If you’re looking for ways to pay down student loans faster, refinancing may be a viable option. But before you go ahead with it, here are some things you should know first about how student loan financing works.

How Does It Work?

Refinancing student loans is similar to applying for any type of mortgage. In both cases, you get approved and given a new rate and payment. However, unlike mortgages, these loans aren’t backed by the federal government; instead, they’re issued by private lenders who offer them at low rates.

What Are Your Options?

Before you choose between going with a specific lender, consider whether refinancing is right for you. If your goal is to lower monthly payments, then refinancing might be worth considering. However, if you want to consolidate all of your debt, then doing so is probably not the best choice. Instead, use that money to pay off your student loan debts.

Is Refinancing Right for You?

Remember that there are pros and cons to refinancing. Here’s what you need to think about:

Pros

Lower interest rates

Can save you money over time

Cons

May take longer to pay back

May only reduce monthly payments temporarily

Should I Refinance Student Loans?

If you have any student loans, then you know how difficult they can be to repay. Many people feel trapped in their current situation due to their high interest rates if they were to make a repayment. Fortunately, you may qualify for refinancing your student loans under certain conditions. Here are some things to consider before refinancing your student loan debt.

Refinancing Your Student Loan

While you might think that refinancing your student loans would be a good idea, there are many factors to consider. You should consult an expert about refinancing your student loans if you’re looking at doing this yourself. If you don’t plan on refinancing your student loans right away, here’s what you need to know first.

Student Loan Interest Rates

The first thing you’ll want to do is check out your student loan interest rates. In order to refinance your student loans, you need to find a lender who will offer low-interest rates for those who qualify. Even though the government lowered the payments on federal student loans last year, your payment amount remains unchanged. So if you were paying $200 per month on a $10,000 loan, you’ll still pay $200 per month regardless of whether you refinance or not. However, you could lower your monthly payments by making extra payments each month.

Student Loan Repayment Period

Secondly, you will want to look into how long it will take for you to pay off your student loans. How long does it take you to make your student loan payments? Are you going to be able to afford to pay off your student loan in less than 10 years? If you can’t, maybe you shouldn’t even bother refinancing your student loans since the interest rate will remain higher than what you’d get elsewhere.

Credit Score

Another factor to consider is your credit score. A bad credit score could prevent you from getting approved for a loan. On the bright side, if you have a decent credit score (usually over 720), you should be eligible for a low-interest rate loan. However, if you’re having trouble getting a job or finding a place to rent or buy a home, it might not be worth risking your credit rating for a relatively small benefit.

Bottom Line

When deciding whether or not to refinance your student loan debt, you need to weigh the pros and cons. Before opting to try to refinance your student debt, you need to research the market to see what interest rates you can get and how much money you can save.

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