One of the most asked questions in regards to student loans is whether or not it is worth it to refinance them. The first answer that comes to mind is, “Of course it is!” After all, for most citizens bank accounts, refinancing is a necessity.
For those that have good credit, there is no reason to not consider a refinance on your student loan. Most lenders will not tell you this, but they are more than happy to take your current loan and give you back another with better terms and conditions. This is how they make their money. By giving you a loan that is easier to pay off, they earn a profit, which means they are willing to deal with your creditors.
You owe your lender the money, and you owe it to yourself by continuing to pay it back. This means if you have a loan with a fixed interest rate, the length of the loan, and a fixed payment each month, it is likely that you will be paying it off in less than five years. However, many students are stuck paying back tens of thousands of dollars in interest for the rest of their lives. With an extended, consolidated loan, this time frame balloons to nearly twenty years.
If you want to save money when it comes to paying back your student loans, you need to take advantage of the refinance option. Your lender will require that you have a minimum credit score in order to qualify. However, this isn’t always the case. In fact, many lenders are now offering the ability to refinance student loans on the basis that you will be able to qualify based upon your current credit score.
Students who have exhausted all of their available federal loans are often faced with the decision of whether or not to refinance. The first thing that they need to do is look at their credit score. If it is lower than the national minimum credit score requirement, then it is likely that you can qualify for a refinanced mortgage loan. Many financial lenders are now offering the option to refinance student loans for students with a minimum credit score.
Of course, it is important to remember that these lenders do not want to continue to lend to students with bad credit. There are a lot of private student loan lenders that specialize in offering low interest loans to individuals with a low credit score. They have one purpose, and that is to make a profit. Therefore, the lenders will often charge borrowers with higher interest rates and stricter terms than those offered to individuals with better credit.
One way that you can tell whether or not it is worth it to refinance student loans is by checking with your current private lenders. Many private lenders will allow you to apply for a federal loan that may qualify you for an education grant. If you have exhausted all federal funding for your education, private lenders may be able to help you through a federal loan program. Many federal programs pay all or part of the interest and fees while you are enrolled in school, so you do not have to repay the loan while you are in school. In many cases, if you have exhausted all federal options, private lenders can help you get a private loan to cover the remaining balance of your loans.
Another way to determine if it is worth it to refinance is by taking a look at the interest rates of the new loan versus the rates you were paying on your existing debt. You can often save several hundred dollars when you consolidate your existing debt with a private lender. Also, if you have an adjustable rate mortgage and are in danger of defaulting, refinancing is an excellent way to bring your payments down and avoid foreclosure. However, there are some risks to this strategy. If your credit is poor, or you are unemployed, you may not be approved for a refinanced private student loan.