With college education becoming more and more expensive, many students are turning to loans to help finance their degree.
Each finance scheme comes with its own benefits and disadvantages, depending on your individual circumstances.
Before we go into further details, let’s take a quick look at the actual process of refinancing a student loan.
What is Student Loan Refinance?
Refinancing is when you consolidate all outstanding debt into one single loan. You’ll receive a new (usually lower) interest rate, as well as re-adjusted monthly payments.
Is refinancing worth it?
This depends on your circumstances. Let’s examine some pros and cons of student loan refinancing.
If you’re currently in receipt of a federal student loan, you may want to hold off on refinancing. The reason for this is that most refinance options are through private loans.
This can affect your eligibility for things like loan forgiveness, lower interest rates and income-based repayment plans. Also, if your loan amount is less than $10,000, refinancing probably isn’t worth it.
You’ll also need to consider your credit history. Refinancing through a private loan company involves a credit check, meaning the kind of loan you get is determined by your previous borrowing history.
Of course, having a co-signer is the perfect solution to this issue. Most students taking out private loans for their education will likely need a co-signer anyway, considering the amount of money in question.
If you haven’t got anybody willing to be a co-signer, all may not be lost. For example, if you’ve been making steady repayments on your current loans, this is something loan companies will definitely take into consideration.
Despite these factors, there are significant benefits to refinancing your student loan (especially if you have several private loans you’re keen to consolidate).
You could save thousands of dollars instantly by getting a lower interest rate on your new loan. You’ll also likely opt for lower monthly repayments, which will help keep your debt-to-income ratio at a manageable level.
Another factor to consider is that you’ll likely need to take out other loans on top of your student debt once you leave college. Car finance, credit card payments etc, are all necessary for many fresh graduates, especially those who are job-hunting straight out of college.
Once you’re employed and have a steady income, merging these new debts with your student loan via refinancing is a great way to manage your expenses and stay on top of things.
Student Loan Refinance can be a highly effective method of consolidating your repayments. It’s all about finding the right option for you!
If you’re thinking about refinancing, why not check out your options? Sites like Saving For College let you compare a whole range of top-ranked loan companies who can get you what you need!