Student loan refinancing could mean big savings if you are able to do it right. Here is how it works:
Personal consolidation loans are one of the most popular choices for college students. A single payment can save you money each month. In some cases, you can get a lower interest rate than you currently pay now on your multiple consolidation loans. Here is how it works:
A new business usually a bank, credit union, or other online lender pays off your individual personal student loans. You no longer are responsible for paying them. However, you must still make your payments on time. Some financial institutions offer a shortened term “pay back” term on these loans. This means you can refinance personal student loans earlier, possibly reducing the monthly payments.
In order to refinance personal student education loans, you must still meet all of the eligibility requirements. Your credit rating must be above “average.” You also need to have an open source credit file from the Federal Trade Commission. The loan must also show that you’ve been making regular on time payments for the past six months. You must not have any collection activity on your credit report.
One way to refinance personal student loans for a better rate is to seek out a scholarship. If you are currently enrolled in a college program, find out if you qualify for a scholarship. The financial aid department at your school usually has a list of scholarships that they are offering each year. Apply for one of these scholarships and use the money to pay back the loan. A good scholarship will not only provide money to help with your tuition, but it will improve your credit rating and help you get a low interest rate on your future loans.
Refinance personal student loans by using a lower interest rate: If your lender will not give you a loan to refinance because your credit rating is not good enough, try to get a lower interest rate on your student loans. Many lenders will work with you to find a lower interest rate on your consolidation or refinancing. This can save you money over the life of the loan. The lower interest rate is likely to be considerably less than the rate that you are paying now, even after taking into account the initial payment. If you are planning on using your consolidation or refinancing funds for buying a home, this can be an excellent way to get a lower interest rate on your home equity.
Use the equity in your home to get a lower monthly payment: You can also refinance personal student loans by borrowing against your equity. This can be an excellent way to reduce your monthly payment, especially if you have a good job history. You can also borrow against your home’s equity, in order to get a better mortgage rate than your current mortgage. You may also qualify for an interest-only or a negative amortization loan if your credit score is too low.
Refinance student loans to keep the payments the same: As mentioned, some lenders will allow you to refinance student loans to keep the payments the same as they were. They will simply change the interest rate and reduce the principle. This will save you money over the life of the loan. You will also need to make sure that you keep up with your payments to avoid accruing more debt with the lender than you already have.
Use personal line of credit to finance your loan refinancing: Some lenders offer personal line of credit, which can be used to finance your refinance student loans. You can use the funds to pay off any outstanding debts, or you can use the money to invest. Using the personal line of credit to finance your loan refinancing is a great option because it can help you control your spending and increase your savings at the same time. Keep in mind that you will likely have to pay interest on this money as well, so you need to decide how much you are willing to spend on interest before applying for this type of personal line of credit. If you have children who depend on you financially, consider offering them an account using the personal line of credit for their education.
Apply for both federal and private loan payments: Most private and federal loan payments come due during the month of your senior year. If you are in college and wish to reduce your payments, talk to your lender about both private and federal loan payments. Most lenders offer special programs for graduating students such as deferred interest programs. In most cases, you can also choose to make smaller private loan payments, if your lender allows you to. Talk to your lender to see if you qualify for any deferment programs that may be available.
Refinance personal student loans to get the lowest interest rate: Another way to refinance is to lower your monthly payment by refinancing with a shorter term. This means you will be able to extend the amount of time you have to repay your loan, lowering the overall interest rate for your loan refinancing. The shorter the term of your refinance personal loan, the lower your monthly payment will be, allowing you to save more money.