Student loan refinancing can save you a bundle of money and help to improve your cash flow and your credit.
Refinancing your student loan is an opportunity for you to take the student loans that you have and reorganize them into a loan with a much better interest rate and/or a more affordable payment.
Like any other type of refinance, you are paying off the old loan with a new loan, essentially restructuring them with better terms.
There are plenty of options to consider when it comes to these loans, so choosing the right plan can prove quite beneficial.
The Benefits And Disadvantages
When you refinance student loans that you have, you are accepting a new loan. The biggest benefit comes from a drop in interest rates, which can save you thousands of dollars over the life of the student loan.
However, student loan refinancing often includes extending the length of the loan to achieve a smaller monthly payment, and therefore you are also increasing the total cost of the loan because more of your payment is going toward the interest portion of your payment.
If you are behind on your student loan payments, refinancing your loan and obtaining a smaller monthly payment can get you out of the hole and current with your loan obligation. A fresh start like this can save you quite a bit of stress.
A Few Considerations
There are often questions about whether someone can refinance their student loan:
- In most cases, you need to have at least $10,000 in student loans in order to qualify for a refinance.
- The good news is that there are generally no fees involved on your part for refinancing the loan, because the lender will get their money through the federal government.
- You can still be in school to refinance, but it makes sense to wait until you have started repayment of the student loan and the conditions become ripe for you to do so.
Also important to note is that you can refinance student loans that are both federally funded and those that are privately funded. You can refinance them together, but its generally not a good idea to do so because you will not be able to get a deferment on the loan because the new student loan will be a private loan, not a government loan. This can be a costly mistake in the long run.
The Time is Right to Refinance
Weigh your options wisely when it comes to these loans, but in most cases, they are well worth the effort to refinance.
Refinancing can sometimes even pull you out of credit problems, but you should know that you can only refinance your student loans twice for the life of the loan debt. Make your choices wisely.