When refinancing your student loans it is important to study your options. TheValu makes this process simple with honest and simple reviews and advice on student loan refinancing.
Student Loan Refinancing 101:
Student loan refinancing is the act of consolidating private student loans, federal student loans, or a combination of the two into a single student loan at a lower interest rate.
Through refinancing student loans, borrowers are able to get a lower interest rate, lower their monthly payments, and pay off student loan debt faster. Through refinancing you are also able to choose between a fixed rate or variable rate, you are also able to change your repayment terms, which typically range from 5 to 20 years.
A fixed-interest rate means the interest rate on your student loans will not change during your loan term. For example, a loan with a 3% fixed interest rate will always remain at 3%. While a loan with a 3% variable interest rate may increase or decrease during your loan term and may not stay at 3% forever.
For borrowers who believe that interest rates will rise in the future, taking a fixed interest rate loan may be advantageous. For borrowers who believe interest rates will decline over time, getting a variable rate makes more sense.
Typically variable interest rates start at a lower rate than fixed interest rates and start at 1.99%.
Why it Makes Sense to Refinance Your Student Loans
- Get a lower interest rate
- Refinancing your student loans can help you get a lower rate which helps you save money. Advantages of a lower interest rate include a lower monthly payment and the ability to pay back your loan faster.
- Choose your own monthly payment
- With more flexible terms and options than traditional federal student loans, student loan refinancing allows borrowers to choose options that better fit their budget and are tailored for their financial situation. Borrowers who want to pay off student loans faster have the option of a shorter repayment period. Alternatively, borrowers also have the option to choose a longer student loan repayment term. The monthly payments will be lower but would increase the total amount of interest paid overtime.
How to Refinance Your Student Loans
To refinance student loans, borrowers will first need to be approved. In order to get approved borrowers will need a credit score of at least 650 and have current employment with a stable income.
The reason for these requirements is that lenders want to ensure that you are financially stable and set up to repay the loan. Because of this, unemployed, low credit score, or financially struggling individuals might have a difficult time getting approved. For those struggling to get approved on their own, applying with a co-signer such as a parent or a spouse with a solid income and strong credit history may increase their odds of approval.
Consumers who refinance their student loans can save thousands of dollars. For example, let’s assume you currently have $100,000 of student loans at an 8% interest rate and 10-year repayment term. Refinancing and getting a new load with a 3% interest rate and 10-year repayment term, would save you over $200 each month and $29,750 in total.
We offer a student loan refinancing calculator that helps our users estimate how much they are able to save when they refinance their student loans.