If you’re currently paying down your student loans, you might want to consider refinancing. Refinancing means taking out a new loan to pay off old ones and potentially save money on interest over time. So why would anyone want to refinance their student loans? There are many reasons, some of the most common ones are mentioned below.
Pay less interest
Refinancing your loans through a private lender may qualify for a lower interest rate than what your current lender offers. This could mean hundreds of dollars in savings each year on your student loan bill.
A lower interest rate and a new payment plan will allow you to pay off the loan faster than before, which means paying less overall interest costs over time. However, suppose the amount saved with the new payment plan is substantial. In that case, it could even allow you to pay off all of your existing debt ahead of schedule and save more money than initially anticipated!
Choose a better repayment term
Choosing a longer repayment term will save you more money in the long run. The more time that goes by, the less interest you have to pay on your loan. This is because the principal balance decreases with each payment over time. So if you have a shorter term, you will have to make more frequent payments which can add up over time and become costly.
A shorter term also means that there will be less of a decline in your principal balance because it won’t take as long for your monthly payments to add up compared to a longer repayment period.
“All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only,” states experts at Lantern by SoFi.
Improve your credit score
Your credit score affects a lot of your day-to-day life. It’s used to determine what interest rate you’ll pay when buying a car or applying for a mortgage and if you can get approved for any loan.
Your score is based on your debt and how well you’ve managed to pay it. If all of your debt payments are current and on time, then your credit score will be higher than someone who has missed payments on their student loans or other bills.
Refinancing can save you money in the long run. The lower interest rate that comes with refinancing may mean that your monthly payments will be smaller, allowing you to pay off your student loans quicker and save more on interest. Lowering your interest rate also means that over time, there’s less money owed overall – so if you’re looking to save money by refinancing, it might be worth considering!
Consolidate multiple student loans into one
If you have multiple student loans and are struggling to keep up with payments, refinancing might be a good option for you. Refinancing can help lower your interest rate and monthly payment, improve your credit score and save money in the long run. Refinancing involves consolidating all your student loans into one new loan with a lower interest rate and more manageable repayment terms.
Hopefully, you’ve got some clarity about student loan refinance and that you’re now feeling more comfortable with pursuing it. And if you are curious about refinancing your federal loans, remember that there is no credit score requirement for this process as long as you have a job.