Student Loan Refinancing: Knowing Your Options

Let’s talk about your finances for a bit — specifically, student loan refinancing. What is it really about? Is it helpful? Do you need any collateral to qualify for one? Presently, almost 44 million Americans have a total of $1.5 trillion and it shows no signs of slowing down. That’s an average of a whopping $34,090 per person. If you are one of those making monthly student loan payments — whether you’re still in university, a starting business owner, an entrepreneur, an employee, or a parent doing your best to make ends meet — you can simplify your payments and probably save some money by having your student loans refinanced.

What is Student Loan Refinancing?

Student loan refinancing does not work in the same manner as title loans and while it may seem a bit complicated for a financial concern, it isn’t as complex as true ECN broker services. Simply put, when you refinance, you are replacing your old, existing loans with a new one at a new interest rate. It can either extend your repayment or lower the monthly interest rates you are paying. The new rates will be based on your payment, credit, and employment history. Understand that it is not similar to consolidating. Consolidation takes all your existing loans and merges them into one. Refinancing pays off your old loan with a new one under new terms and conditions.

What factors should I consider in getting one?

One thing you have to keep in mind is that you can only refinance once. So when you decide to get a refinancing loan, it has to be worth it. Meaning, it should give you a great deal that you can enjoy lower interest rates that will save you money and not get ones that have higher rates. That being said, here are some things to consider:

Interest Rates

The interest rate determines the loan cost. There are two types of interest in refinancing. The fixed-rate type and the variable rate type. Variable rates are subject to change as the market fluctuates. Meaning, it can go up when the market rates rise. A fixed-rate however stays the same for the entire duration of the loan. Variable rates are beneficial for the short term but will cost you a lot more in the long run in light of a rising interest rate environment.

Fees

Some lenders charge origination fees on top of the usual service fees. Be sure to ask if you qualify for a fee-free deal as there are lenders who offer that particular perk. Make sure to also check if there are any penalties for early repayments.

Term

A shorter loan saves you more money on interest rates but usually warrant bigger monthly payments. A longer term brings down your monthly expenses at the cost of paying interest rates at a longer period. If you can afford it, experts suggest going for the short-term loans. Most student loan refinance options range from a 5 to 20-year period. We hope that everything stated here can help you make a wiser and more informed decision regarding your student loans. Education is expensive but with the right help and provision, it won’t cost you your life.