Refinancing a student loan is a great way to save money and simplify your finances. The best part? You don’t even need good credit to get started.
To Get a Lower Interest Rate
You might get a lower interest rate by refinancing your student loan. If you’re paying more than 6% for your current private student loan, refinancing could save you hundreds of dollars each month and thousands of dollars over the life of the loan. The savings depend on how much money you are currently spending on interest, but in most cases, it is worth it to refinance a graduate school loan if you can get a lower interest rate.
To find out what refinancing might do for you and what kind of rates are available, go online. Lantern by SoFi experts says, “To check the rates and terms you might qualify for, Lantern and its network lenders do a soft credit pull that won’t affect your credit score.”
To Consolidate Multiple Loans
Consolidating your student loans is one of the easiest ways to reduce your monthly payments and get a lower interest rate. When you consolidate multiple loans into one loan, your overall balance will be lower, which means you’ll pay less in interest over time.
Consolidation may result in a smaller monthly payment because some of your monthly payment goes toward paying off interest rather than principal (the amount borrowed). Although this means that it will take longer for you to pay off your loan (and save money), it might be worth considering if you’re currently struggling with making payments on multiple small loans.
To Drop a Cosigner
You may have a cosigner on your student loan, but it’s not necessary to have one. In fact, there are certain benefits associated with refinancing without a cosigner.
If you’re looking to get rid of your cosigner, consider refinancing as soon as possible because:
- You don’t want them stuck with unpaid debts for too long.
- The longer they’re responsible for paying off the debt, the more difficult it will be to remove them later.
To Refinance Parent PLUS Loans
If you’re a parent who took out PLUS loans, you can also refinance your debt to a lower fixed rate. Since 2006, the interest rate for Parent PLUS has been 6.31% and was recently raised to 7%. As of March 1st 2019, it’s now 6.95%.
This means that if you’re taking out loans for your child’s college education, there are two major benefits to refinancing:
- You’ll get access to a fixed-rate loan instead of being tied down by the variable one.
- You’ll be able to lower your monthly payments.
To Switch from a Variable Rate to a Fixed-rate Loan
It can be difficult to find the best deal if you have a variable-rate loan and want to switch to a fixed-rate one. Unfortunately, many lenders don’t offer fixed-rate loans for student loans. But if you find an interest rate that seems good, confirm whether it’s fixed or variable and what its cap is.
A student loan with a variable interest rate will rise or fall depending on market conditions. However, a fixed-rate loan doesn’t change over time and remains at the stated rate for the life of the loan (though some lenders allow borrowers to refinance their loans again if rates drop significantly).
This article will help you learn about the benefits of refinancing your student loans. Contact experts today if you have any questions or are interested in refinancing.
