Refinancing your student loan can help if you have graduated, landed your first job, and have a solid credit history. In the case of refinancing your student loan, you are essentially taking out a new loan to pay off an existing one at a lower rate. There are many different reasons people might want to refinance their student loans. Whatever your reasoning is for refinancing, it can be beneficial if done correctly. But before diving into the process, here are warning signs that indicate when it’s time to refinance your student loans.
You have a good credit score
If you have had good credit with no missed payments on your credit cards, maintained a low amount of debt and kept your account open for several years, you will likely qualify for the best interest rates. However, if you have been making payments on time for years, you will most likely get a lower interest rate on a new loan than someone who just graduated and has never made a payment before.
This is because people with a solid credit score are considered lower risk to lenders and therefore get a lower interest rate than someone with a low credit score. This can save you money in the long run if you decide to refinance your student loan.
You want to change your repayment terms
You can refinance your student loan to change repayment terms to an income-driven repayment plan. These repayment plans tie your monthly payments to your income, so you will have lower monthly payments if you make less money.
If you qualify, you can extend the length of your repayment period. This is helpful if you plan to go back to school and want to defer your payments while you are in school again. If you refinance your student loan, you can also choose to change your repayment terms. This can be helpful if you cannot make your monthly payments.
You are struggling to make payments on your current loan
If you are struggling to make payments on your current loan, you may want to consider student loan refinancing. By refinancing your loan, you can get a lower interest rate. It will help you save money over the lifetime of the loan. According to SoFi, “refinancing is a great solution for working graduates who have high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans.”
You want to lower monthly payments
Perhaps you have the money to make larger payments on your loan, but you want to lower monthly payments. In this case, you would likely refinance your student loans to get a lower interest rate. Lenders usually charge higher interest rates on loans for people with bad credit.
Refinancing to get a lower interest rate and lower monthly payments can help you if you don’t have the money to make larger payments. For example, you may qualify for a private loan with a higher interest rate if you have bad credit.
There are many benefits to student loan refinancing. For example, you can extend the length of your repayment term, change your repayment terms, and get a lower interest rate or lower monthly payments. You will also have one loan to manage instead of multiple loans that may come with different due dates and payment amounts. Therefore, it’s essential to consider all your options before deciding to refinance your student loans.
